samchain/econo-pairs-v1 huggingface dataset:
In addition, a significant number of important emerging economies are in a very favorable situation of liquidity and external solvency, with more flexible foreign exchange rate systems and low inflation rates. 6  BIS Review 97/2007  The Chilean economy in this new financial setting It is premature and bold to try to quantify the possible effects on the economy of this adjustment that is under way. Pass-through channels will be rises in risk premiums, changes in the future path of monetary policy interest rates in industrial economies, adjustments in government bonds’ interest rates of industrial economies, a slowdown in the US and the world economy and a drop in commodity prices. What we do know is that Chile has built through the years a framework of policies and institutions that has not only favored price stability and reduced output volatility, but also increased the economy’s resilience to shocks generated by adjustments occurring in international financial markets as have been observed recently. Such a framework includes an autonomous Central Bank that conducts an inflation-targeting monetary policy under floating exchange rate, a fiscal policy whereby public spending is tied to the government’s permanent income, accumulating foreign exchange assets abroad during times of copper-price bonanza, thus contributing to enhance fiscal solvency, stabilize the real exchange rate and smooth the business cycle. Finally, Chile’s banking regulation and supervision system has helped develop a strong and safe banking system.

These factors combined have resulted in a large increase in the different measures of inflation, bringing CPI and CPIX1 (a measure of core inflation that excludes perishable foods, energy and regulated tariffs) annual change close to 4%. By contrast, labor cost pressures and other inflation trend indicators are nearer to 3%. Similar problems (i.e., increased inflation due to sudden rises in food prices) have been recently suffered in such diverse countries as South Africa, Brazil, Colombia and China. It is interesting to note that a price measure that excludes foods and energy prices, similar to the CPI core inflation calculation applied by the US, shows annual change below 2% in July (Figure 2). 2  BIS Review 97/2007  Figure 2: CPI, CPIX1 and CPI inflation excluding food and energy (annual change, percent)  Note: In brackets participation in total CPI basket. Sources: Central Bank of Chile and National Statistics Bureau. This phenomenon is not new. Given the supply-side or specific price shocks, the 2000s have seen annual inflation drop below 2% and climb above 4% during temporary episodes. In this picture of higher CPI inflation due to various supply shocks, short-term inflation expectations have increased substantially, but remain close to 3% for medium and long term. Because monetary policy affects inflation with lags that are largely unknown, but long – usually more than a year – not much can be done to reverse a short-term inflation jump.
That was corroborated by our Agents’ pay survey which was pointing to a ½ percentage point increase in settlements this year, from around 2½% to around 3%, with the ability to recruit and retain staff the number one factor driving growth. Since February the picture has remained the same. Wages did indeed pick up to 2.8% by the May Inflation report. And the very latest observation, of 2.9% regular pay growth in March, was slightly higher than our expectation even in May. Wage growth has now been rising steadily over the past six months, and unit labour costs have been rising towards growth rates consistent with overall inflation at target. The period of unusually subdued growth in wages appears to be coming to an end. The year so far That brings me to the third unusual situation that that we have had to contend with – developments in the economy so far this year, and how the MPC have responded to them – most recently at our May policy meeting. At the time of the February report we judged that the trade-off between managing slack and controlling inflation was much diminished. We went so far as to say that “were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat 14  See: Ramsden, D (2017), “Monetary Policy from End to End: Define, Decide, Deliver”, speech at King’s College London, 20 November 2017.

It was impossible to gain a clear insight into the complicated CDO structures. Consequently the interest rates on the interbank markets soared. Parallel to this, scepticism towards the credit rating agencies' ability to grade structured products increased, and this concerned not only products containing subprime loans. Several central banks decided at this point to intervene in different ways in the interbank market. In general, the interventions contributed to reducing interbank rates towards desirable levels for shorter durations. For the longer durations the difference between the interbank rate and the risk-free rate remained substantial. The unwillingness to lend money was a hard blow to institutions dependent on financing from the market. For example, the British mortgage lender Northern Rock was forced to seek help from the Bank of England to manage its acute liquidity problems when it could no longer obtain financing. The market turbulence during the autumn had relatively limited effects on the Swedish banks. The main effects were higher financing costs, some changes in the value of bond portfolios and less activity on some markets. Here an important factor was the fact that the Swedish banks did not have any significant exposure to securitised subprime loans, neither directly nor indirectly through investment companies. Deficiencies in the functioning of the credit markets have been exposed The rapid developments in the financial system over the past decade have essentially been beneficial. There is no reason to wish we were back in the financial iron age of the 1980s.
Such an approach would allow capital to move more freely, efficiently and sustainably between jurisdictions. With robust standards consistently applied, wholesale financial services could be brought more fully into bilateral trade agreements, keeping the global financial system open and resilient, and supporting greater trade, investment and innovation. This high road leads to more jobs, higher sustainable growth, and better risk management across the G20. But there is another path – the low road – where trust and cooperation diminish, fragmentation hardens, capital flows are disrupted, and trade and innovation are curtailed. If authorities do not have sufficient confidence that their efforts to promote financial stability are being reciprocated elsewhere, then concerns about the risks of openness to domestic financial stability could intensify. If they do, domestic authorities will act to safeguard their primary responsibilities. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  Without cooperation, host authorities may become more inclined to impose local requirements on domestic entities, to insulate domestic stability in cases where there is no support from the group or coordination amongst authorities in responding to distress. In a world where many banks and FMIs are highly interconnected both financially and operationally that would generate significant inefficiencies, frustrating the benefits that flow from open international trade and investment. Taking the low road would be a sub-optimal for all, with fewer jobs, lower growth and higher domestic risks. VI. The Path Taken by Brexit  How the Brexit negotiations conclude will be a litmus test for responsible financial globalisation.

All the conditions are in place for following the high road of mutual recognition and cooperation both with Europe and across the G20. The UK has the expertise, the temperament and the will to take this path, one that will make all the difference to all our citizens. 11  All speeches are available online at www.bankofengland.co.uk/speeches  11
But, in my opinion, we are moving in the right direction. Were we to compare the snapshot of 10-12 years ago with what we can see today, I believe we could describe events as a revolution rather than evolution. Despite this revolution, what has not changed over this period is the type of relationship that we supervisors have with banks. The supervisor/supervisee relationship is not straightforward, and nor is it free from tensions and differences. These tensions and differences are inevitable and part of the so-called “supervisory dialogue”. I would go so far as to say that these differences in our relationship are not only inevitable but indeed positive. As Gonzalo said earlier, we should understand one another both in our agreements and disagreements, constantly maintaining a transparent and sincere dialogue. Despite these differences, supervisors and supervisees share a common goal. We both want banks to be sustainable and continue servicing their customers, both now and in the future. To achieve this goal society needs solvent banks, with a sufficient level of capital to withstand economic ups and downs, and profitable banks, with enough capacity to generate profits to remunerate capital. In my public appearances. I usually go on now to give an itemised list of “duties” for banks. It’s a familiar list and the duties are constantly referred to and published in the press. But for once I will sidestep this list of duties, something which both banks and, very possibly, all of you will appreciate.

A good reflection of this new manner of conduct is in the recent real estate credit legislation. The financial crisis has given rise to more demanding legislation that calls on banks not only to inform but also to act impartially, transparently and professionally, taking into account the rights, interests and needs of their customers. It may be said that the regulations now transcend mere transparency in form. One very positive aspect of the legislation is the improvement in legal certainty. Clearly, by properly protecting the customer, the risks of litigation are being significantly reduced. And such risks are one of the main costs the sector has been bearing. Let us not forget that the cost of litigation far exceeds any potential benefit that some banks might have obtained in the short term through questionable conduct. Moreover, improper conduct does not only affect those banks guilty of it, but the reputation of the sector as a whole. To conclude, this new type of customer-bank relationship must be the starting point for any sustainable banking business model. Naturally, if it is to be successfully set in place, a topto-bottom cultural change is essential in the organisation. This change will be headed for 10/13  failure if the bank’s senior officers and management do not offer their resolute support. Once again, we are talking about governance as a precondition for change to occur. Financial education I have highlighted how society’s demands with regard to banks’ behaviour with customers have increased considerably.
Monetary policy cannot and should not counteract changes in relative prices. But what central banks can govern in the long term is the way inflation develops. A change in relative prices can occur when there is low inflation as the price increases on the goods that become relatively more expensive are compensated for by low price increases or even falling prices on other goods. The same relative price change can occur with high inflation, when all prices rise rapidly but some more than others. But if commodity prices soar, this means that companies' costs will rise and inflation will be pushed up. For a central bank with an inflation target the task is then to use monetary policy to avoid secondary effects on wages and other prices and to counteract a rise in inflation expectations. If prices rise more quickly abroad  BIS Review 57/2008  3  then a credible monetary policy should also lead to a stronger domestic currency, which contributes to limiting the impact on domestic prices. Managing price increases in a longterm perspective is actually a question of making well-balanced interest rate decisions at each individual monetary policy meeting. The principles are simple… So how should a policymaker reason at each monetary policy meeting when rising commodity prices are pushing up inflation? Describing what should be done in principle is fairly simple.

High food prices have led to a reduction in purchasing power and social unrest in many areas. By limiting exports of foods and thereby keeping the supply in their own country many countries are hoping to be able to keep down domestic prices. The fact that this in turn risks pushing up world market prices even further and making the situation worse for some countries does not seem to carry any weight. Commodity price rises of course have consequences for monetary policy. How will commodity prices develop, and what contagion effects will there be for other prices? These are questions that every central bank has to take into account when making decisions. It was also something we discussed at the Riksbank’s most recent monetary policy meeting just over two weeks ago. I shall return to this shortly. Why have commodity prices risen so much? What is this sharp rise in commodity prices due to? As is often the case, it is difficult to point to any individual factor that will provide a complete explanation. Many factors have played a role. A product such as rice is, when one looks at it, rather different to a product such as oil. This would indicate that the driving forces have not been identical. But at the same time, the price increase has been so similar for so many different types of commodities that one can suspect there must be some common denominator.
The way to do it is to set up a state-administered system to which all the banks pay a fee in relation to their risks, much like an ordinary insurance policy. Sure, the state still stands the risk in the event of a large failure. But in this system, it is duly compensated for the risk. And the financing is robust. If implemented widely, this solution will also make for a more level playing field between banks from different countries competing partly on the same markets. I therefore hope that the proposal will get more international attention than it has so far. There must be a strong negotiating position for the government even when financial stability is threatened The above set up is a good set up to be able to handle the average bank failure. But, again, in some situations a different regime may be needed. In particular, this may be the case when it comes to larger and more complex banks in a situation of markets turmoil, when there is a systemic threat to the financial system. In this situation, it may not be possible to immediately revoke the licence for a bank which is in serious violation of the supervisory regulations. The focus will need to be on maintaining the key operations in the financial system. To secure this, the bank may need to stay open, at least for a while.

On the contrary, it is important to deal with these issues on an international level. But the overall framework has not been drafted with the specific situation in the banking sector in mind. It may therefore be difficult to find suitable solutions in a crisis situation without running the risk of breaking a number of regulations. It is not acceptable that decision-makers should have to fumble in an acute crisis situation, trying to steer clear of this risk. It is also important that the action by the authorities in such a situation is evaluated against a regulatory framework fit for its purpose. A framework which makes it possible to maintain a proper balance between the different parties involved also in a crisis situation. There is a need for a special insolvency and resolution framework for banks In my opinion, all this points in one direction. A special insolvency regime is needed for banks and other institutions that are covered by the safety net. In this country it has long been said that banks should be covered by the ordinary corporate bankruptcy legislation, at least as long as there is no direct threat to the system. This is because government intervention over and above the existing safety net for the banks should be avoided. I believe that this is the wrong way to look at it. The ordinary bankruptcy regime does not sufficiently recognise the need for speed when dealing with banking problems.
The adjustment of costs and relative prices, albeit with some delay compared with what would have been desirable, has ultimately placed the Spanish economy in a much more competitive position. The reduction in unit labour costs has allowed virtually all of the losses in competitiveness that had built up in the first ten years of the euro to be absorbed. The process has not, however, been free from difficulties, since it was initially based, as I stated earlier, almost exclusively on job destruction. From 2010, the contribution of the adjustment in wages progressively became more prominent, a trajectory which stepped up following the 2012 labour market reform. The gains in competitiveness and Spanish firms’ greater export-geared thrust are providing for the growing penetration of our products in foreign markets, against a background of increased geographical diversification and higher goods and services exports. The marked decline in imports during these years also reflects the gains in competitiveness, although the weakness of domestic demand has likewise helped contain purchases from the rest of the world. Set against these developments, the least favourable aspect of our foreign trade continues to be the high dependence on imported energy. As a result of the foregoing, our economy posted – for the first time since 1997 – a balance of payments surplus, i.e. net external lending, of 1.5% of GDP. This trajectory will foreseeably continue over the coming years, meaning that Spain’s high level of foreign debt will be declining.

The challenge is to enhance efficiency and reduce costs, respond to market and regulatory demands and, most of all, gain competitive advantage through innovative products and services. Ladies and Gentlemen, The success of this IBBM-University of Nottingham collaboration will depend on the active involvement and support from the financial services industry. I therefore, encourage the industry to play a proactive role in supporting the activities organized by the Financial Services Research Forum. In concluding, I look forward to seeing greater collaborative efforts between the academia and the industry in research and development for the financial services industry. On this note, I am pleased to officially launch the collaboration between IBBM and the University of Nottingham , in the Financial Services Research Forum. Thank you. 2  BIS Review 63/2006
On occasions it has been argued that the higher regulatory pressure on banking activity in recent years, together with the future regulatory requirements pending implementation following finalisation of the Basel III agreements, have negative effects on banks’ profitability. Irrespective of this, it should be recalled that the Basel III reform package aims to address the shortcomings identified in the regulatory framework in place prior to the global financial crisis and to strengthen regulation, supervision and banking practice internationally in the interest of financial stability. In accordance with this aim, the Basel III reforms have significantly strengthened the resilience of the global banking system. Specifically, since 2011, internationally active banks’ common equity tier 1 (CET1) capital has risen by 91% to over € trillion. In addition, the average risk-weighted CET1 ratio has risen from 7.2% to 13%, while banks’ average tier 1 capital leverage ratio has risen from 3.5% to 6%. Moreover, these figures will likely continue to rise in coming years, given that some of the Basel III reforms will not be fully in place until 2022. Indeed some, such as the output floor, which limits the difference between risk-weighted assets (RWAs) under the standardised and IRB approaches, have a transition period that may continue up until 2027. A document published by the Basel Committee3 in June reviews the recent academic literature on the macroeconomic benefits and costs of higher capital requirements.

2  BIS central bankers’ speeches  We are committed to jointly resolving any outstanding issues, if any, for the purpose of advancing Islamic finance activities in both countries. We hope significant deals could be initiated following today’s event to facilitate cross-border flow of funds between both countries and regions, with the Malaysian delegation ready to share their experiences and expertise in this area. For example, Malaysian players can partner with the UK players to structure a syndicated Islamic financing facility or joint lead-arrange a sukuk issuance for any of the identified UK regeneration projects. Both London and Kuala Lumpur can succeed and prosper as leading global financial centres in Islamic finance. We are open to challenges and new ideas and look forward to working together with TheCityUK through a strengthened partnership to achieve these objectives in the years to come. A UK-Malaysia Working Group may provide that strategic platform to holding continuous dialogues for this purpose. With this, I wish the Forum an engaging and fruitful discussion. Thank you  BIS central bankers’ speeches  3