samchain/econo-pairs-v1 huggingface dataset:
Elvira Nabiullina: Review of recent inflation developments in Russia and economic outlook Statement by Ms Elvira Nabiullina, Governor of the Bank of Russia, in the follow-up to the Board of Directors meeting, Moscow, 22 October 2021. * * * Good afternoon, W e made a decision to raise the key rate by 75 basis points to 7.50% per annum. This is a significant increase and, obviously, this is not a fine-tuning exercise. This decision is driven not only by the current pace of inflation, but primarily by high inflation expectations and a considerable revision of the forecast compared to July. Inflation will be going down from a higher point than we assumed. This will require a greater tightening of monetary policy than we planned in our July forecast and expected in September. I will now explain in detail why we have made this decision. First of all, I would like to talk of inflation. In August and especially in September, inflation significantly exceeded our forecast. During the first weeks of October, we could see no signs of a weakening of inflationary pressure. Although the sudden surge in inflation that occurred in September was provoked predominantly by temporary factors, we consider this situation as potentially dangerous as it affects inflation expectations. I would like to remind you that inflation soared in September due to a smaller vegetable harvest and higher costs in livestock production. Meat, milk, and vegetables are all the so-called marker products.

At the same time as Keynes’ analysis began to be questioned on the basis of economic theory 3 , the world suffered deep recessions in the wake of the oil price shocks of the 1970s,  1  The NBER has a “Business cycle dating committee” which has a procedure for dating peaks and troughs in economic cycles in the United States. 2  J. M. Keynes., “The General Theory of employment, Interest, and Money”. London: Macmillan. 1936. 3  Lucas' criticism, for instance, R. E. Lucas "Econometric policy evaluation; a critique.” Carnegie-Rochester Conference Series on Public Policy 1976. 1: 19-46. BIS Review 121/2008  1  which led to a more pessimistic view of the ability of economic policy. People realised that fiscal policy measures often came too late and that attempts at an active economic policy often merely resulted in high inflation. An alternative interpretation began to emerge; fluctuations in economic activity were regarded as the result of changes in production conditions. The 1980s saw the advent of RBC-models 4 , which stands for Real Business Cycle. The characteristic of these was that they considered fluctuations in the production of goods and services to be natural consequences of externally caused changes in production conditions. This could be changes in technology; IT is one example. It could also be sharp swings in the oil price, terrorist attacks or war, but also more natural examples such as the weather. They assumed that the markets themselves were best suited to adapt to the changed conditions.
Most of us participated in the celebration of the 25th anniversary of the Association. Then the focus was on the banking sector itself, mainly on the implementation of measures from the unprecedented in scale and depth asset quality review and stress test of Bulgarian banks, i.e. we were primarily concerned with ourselves. Five years later, the main focus of the banking community is on how to most effectively help businesses and households in coping with the economic challenges they face. In other words, what we set as a goal a few years ago has already been achieved, namely: from a source of problems in the past, now the banking sector is an important factor in solving them. Another topic we discussed five years ago was the possibility of the BNB and the banking sector to join the European Banking Union. At that time, many people in Bulgaria and abroad saw this possibility as distant and difficult to achieve. Today Bulgaria is a member of the European Banking Union and will soon celebrate a 2-year anniversary of this membership. What does this mean in practice? This means that the BNB and our banking sector, respectively, are the first public institution and the first economic sector in Bulgaria to be part of the euro area. The BNB participates in making the most important decisions related to the supervision and resolution of European banks, including Bulgarian ones.

From the position of the BNB and in view of the goals for controlling inflation, it is very important that the country does not assume significant additional permanent expenditures, which are not backed by permanent revenues. There are two groups of risks associated with such an approach: (i) the risk of an inflationary spiral and (ii) the need for painful fiscal adjustments in the near future, whether in terms of revenue, i.e. by increasing taxes, or by cutting costs. Along with external factors, this would lead to a significantly more complicated macroeconomic environment for the Bulgarian banks. In terms of the external factors and their further complication and deterioration because of the war in Ukraine, most important will be the decisions of the big leading central banks, primarily the ECB in our case. There are already clear statements about three things that will happen during the third quarter of this year: (i) the ECB will effectively end net asset purchases from the beginning of July; (ii) subsequently the ECB intends to raise its key interest rates; and (iii) will do it again in September so that by the end of the quarter we will move away from negative interest rates. Obviously, in the following months and at least a year ahead we will be facing the challenge to find the very difficult balance between the measures to control inflation and the measures to prevent recession. How is our banking sector meeting the new challenges? Our starting position remains very good.
It is the role of monetary policy to ensure that the nominal appreciation of the króna as a share of the real exchange rate rise is conducive to bringing inflation down to target by the time the adjustment is over. *  *  *  The economic policy framework is determined by the collaboration between the authorities and the International Monetary Fund (IMF). According to the IMF programme, the main task of monetary policy at the outset was to arrest the fall of the króna and then promote exchange rate stability, but without formally resorting to a fixed exchange rate regime, as it was considered desirable that the króna should appreciate afterwards. This strategy was triggered by the currency crisis, which has sent the exchange rate far below the levels previously thought likely, let alone desirable, and by the large share of exchange rate-linked loans in private sector debt. The problem, however, was that achieving exchange rate stability with conventional tools, such as interest rates and foreign exchange market  2  BIS Review 39/2010  intervention, would require astronomical interest rates and/or larger foreign exchange reserves than Iceland had, partly because of foreign investors’ large holdings in krónur. As a result, it was decided to impose temporary capital account restrictions, in the hope that they would provide monetary policy with the elbow room to base its decisions on the slack in the economy while establishing exchange rate stability. Another goal was to create some shelter for private sector debt restructuring.

But after the series of new shocks during last summer – Russia, LTCM, the deepening recession in Japan and the worsening position in Brazil – the prospects, at around the time of the IMF meetings in Washington last autumn, were looking pretty bleak. Now I would completely destroy my reputation as a central banker if I were to suggest that we are out of the woods. But the darkest financial storm clouds have lifted a little since the Fund meetings. The US Congress finally approved more resources for the IMF, the threat of a credit crunch extending to the industrial economies in the wake of LTCM receded, helped also by an easing of monetary policy in Europe as well as in the United States. In Asia, Japan took more determined policy action to address the fragility of the banking system and to stimulate domestic demand; the yen strengthened; China and Hong Kong both remained admirably resolute; and there have even been some encouraging signs of renewed capital inflows to some of the Asian countries. The floating of the exchange rate in Brazil last month inevitably increased concerns about emerging market instability, but it is encouraging that adverse effects on other markets have so far been limited. BIS Review 17/1999  –3–  There may be further particular setbacks, as far as the overall financial situation is concerned, but I think I can confidently say that if it doesn’t get any worse it is likely to get better.
It is no secret: the New Accord offers a far more sophisticated view of risk than the far simpler 1988 Accord does. But that is indeed the point. The Committee is adopting the best measures of credit and operational risk being developed by leading institutions worldwide. Today’s conference offers a good picture of just how sophisticated – and sometimes complex – the measures of credit risk are becoming. Loan officers and risk managers now have at their disposal a constantly evolving array of databases, software, credit risk models, and risk rating systems, all of which provide supplemental empirical insight into a risk previously not readily quantified. And all of these new tools were initially developed or refined to  BIS Review 46/2003  3  promote a bank’s competitiveness and protect it against loss – and not just to respond to a regulatory mandate. We seek a balance between complexity and risk-sensitivity, between complexity and the necessary room for diversity and between complexity and comparability. Where complexity in the rules fails to add much to the sensitivity of the New Accord’s measures of risk, the Committee has worked to remove it. In the past, this has included eliminating the so-called “W” factor for credit risk mitigation and even shortening and simplifying the disclosure requirements of Pillar 3. Just two weeks ago, the Committee announced in our Madrid press release that we will simplify the proposals for securitisation exposures and replace the “Supervisory Formula” approach to unrated tranches with a simpler rule.

Of the 19 banks, nine were sufficiently capitalized to meet the minimum capital ratios under stress conditions, while ten had a combined capital shortfall of $ billion. The banks with a capital shortfall were expected to provide detailed capital plans that included raising additional capital – by measures such as restricting payouts, raising new equity, selling assets, or utilizing capital available from the U.S. Treasury. Banks both with and without shortfalls aggressively sold assets and raised additional capital, resulting in a very significant recapitalization of the 19 banks over a relatively short period of time – as is apparent in the figures shown earlier. Stress testing and discretionary capital distributions Now I would like to mention the role of other stress testing in decisions to pursue, and approve, the resumption of discretionary capital distributions. The SCAP was designed to estimate how banks would perform under stress conditions. However, the economic assumptions and the impact of those economic assumptions on financial institutions were by definition educated estimates of potential outcomes. By the end of 2010, many banks were noting that they had substantially recapitalized and in some cases were now well above regulatory minimums – and thus would like to resume or increase stock buybacks or dividend payments. To evaluate the requests by banks to increase dividend payments, U.S. bank supervisors pursued an exercise known as the Comprehensive Capital Analysis and Review (CCAR), and stress testing was one component of that broader exercise.
In 2003 heavy emphasis was placed on evaluating the significance of the hypothesis of deflation, not its absence, nor the probability of future inflation. Franco Bruni does not assign to the ECB the same level of responsibility, given that it kept its rates higher than those in the United States. He is not one of the many who belatedly reconverted to monetary rigour ex post, forgetting what was written at the time. On 2 December 2005, Franco Bruni wrote: "The small ECB rate increase was announced. It is a logical increase (which in fact comes a little late) for various reasons. The starting point is very low…". 1 And yet Bruni seems ungenerous. First of all, the European economy grew at a rate of 1.5% over the three-year period 2003-05, below potential and even lower than the US rate (3%). Moreover, in this period, the effective exchange rate of the euro appreciated, by slightly less than 10%, signalling a relative tightening of monetary conditions. I would like to recall that at the time there were many, both in academia and in politics, who argued that the ECB should tie its monetary policy to that of the United States and fix the exchange rate to the dollar. Just imagine how much more liquidity would have been provided to the market in those years and how much more devastating the effects of the bursting of the bubble would have been now!

This includes the implementation of mandatory climate-related disclosures by various governments, regulators and independent bodies to hold companies accountable for their impact on the environment. The world is clearly moving more aggressively on building climate resilience in what is being described as the “decisive decade for climate action". Individual countries and firms cannot stand still. Not just because climate change has severe implications at a domestic level – more so for developing countries – but because global climate actions affect us directly through economic and financial linkages. How we respond is crucial. With the growing traction to sustainability, the 1/5  BIS central bankers' speeches  risk of stranded assets is real and significant. The risk of getting left behind and shut out of key markets will affect our economic competitiveness, lead to a drop in growth and worsen existing inequalities. Ultimately, it is at the local level that the effects of climate-change will be mostly felt – through its transmission to food supply, energy and transport, disease and livelihoods. It is therefore in our collective interests and responsibility to act now, and to act together. As the lifeblood of the economy, the response of the financial sector is crucial on several levels – (i) to safeguard the resilience of the financial system through the identification and management of climate-related risks; (ii) to direct financial flows to low-carbon activities; and (iii) to support the transition by economic agents through appropriate financial and risk solutions.
At the end of my speech I expressed concerns that the correction of financial imbalances, and the associated re-pricing of risk, might not have run its full course. As we now know, this was indeed the case. Only ten days later, the re-pricing in markets took a quantum leap. In mid-September the turbulence turned into a full-blown crisis. The chart of money market spreads tells this tale clearly. BIS Review 103/2009  1  As you can see, credit spreads soared. Financial market activity fell dramatically, volatility spiked and the global financial system came close to seizing up. Central banks stepped into the breach, addressing this unprecedented market failure. The ECB was in the vanguard of actions to contain these intensified tensions, taking a number of standard and non-standard measures. The measures by the leading central banks eventually paid off. As you see in the chart, money market spreads – a symptom of the market failures that I mentioned – retreated from their peaks. They are now back at levels comparable to those before the intensification of the crisis last year. But they still remain elevated in a longer time perspective. The crisis triggered a freefall in economic activity. The chart shows that within a few months only, from January to July 2009, the projections for 2009 shifted massively to the left, in highly negative territory. After they centred around -1.5% in January 2009 and -3.2% in April 2009, they dropped to -4.5% in July, entirely outside the distribution range still a few months earlier.

Notwithstanding some recent signs of improvement in the economic outlook, it is premature to declare the financial crisis over. From today’s perspective, the need for enhanced credit support remains. Therefore, for the time being central bank liquidity is likely to remain abundant. This does not mean, however, that the broader concept of liquidity in terms of monetary aggregates grows strongly. And it is this broader concept, not central bank liquidity itself, which is related to inflationary pressures over the medium term. Of course, central bank credit and broader monetary aggregates are linked over time. In a modern banking system, and in normal circumstances, central bank credit is largely used by banks – in the form of required reserves – to create bank credit, and expand deposits and broad money aggregates. So, an increased provision of central bank credit can lead – more or less automatically – to an increase in broad money. In current conditions, that link has been weakened, however. Today, banks – in the aggregate – tend to hold part of the central bank credit that they obtain in our refinancing operations not as a reserve against an expansion of loans and deposits, but in the form of  8  BIS Review 103/2009  excess reserves deposited with the Eurosystem. This attenuates the automatic link between the provision of central bank liquidity and broad money. And, as a consequence, it attenuates the inflationary potential of the Eurosystem’s outstanding credit to banks.
The debate about putting more activity through central counterparties is an example. Frankly, it could have taken place a decade ago, and it is a crying shame that it didn’t. The reason it didn’t was that no one came into work thinking that it was their job to think about that and that they had a responsibility for taking a system wide perspective and actually doing something. 2  See Tucker, P M W (2010), “Shadow Banking, Financing Markets and Financial Stability” at BGC Partners Seminar, London, January 2010. 4  BIS Review 145/2010  Institutions are now being created around the world – the Financial Stability Oversight Council in the US, the Systemic Risk Board in the EU, the Financial Policy Committee in the UK – which I earnestly hope will bring that kind of perspective to our work. And the final area is leaning against the credit cycle when it threatens stability. The zeitgeist embraced the seductive idea that either there wasn’t a bubble or if there was a bubble that there was nothing you could do about it. Which was dangerous nonsense, as events have proved. This is not about fine tuning the credit cycle. But we do need to be prepared to take the punchbowl away before the party gets completely out of control. That was the view 50 years ago. Forward to the past.

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Malaysia has adopted a hybrid approach towards governance reform that includes legal reform, self-regulation as well as measures to encourage market-based regulation. The approach balances between prudential regulation, market discipline and shareholders surveillance. Malaysia has proceeded on the basis that there are aspects of corporate governance where statutory regulation is effective and necessary and in others where self-regulation is more appropriate. Building the necessary legal and institutional framework to support the development of good corporate governance practices within the capital and financial markets is therefore an important part of the process. Among the various measures initiated includes the law that provides the statutory framework to protect the interest of the depositors, customers and shareholders as well as the prudential framework to promote financial stability. This includes the legal provisions prescribing the maximum permissible shareholding limit to avoid concentration of ownership. There is also a restriction on extension of credit to related parties to avoid conflict of interest, as well as a limit on the lending to single customer. Other measures include the issuance of specific guidelines on the role and responsibilities of directors and the creation of various board committees. Greater emphasis is also accorded to the role of independent directors, minimum qualifications of such directors and their compensation to ensure sufficient independence to act in the best interest of the institution. In the area of Shariah governance, guidelines have been issued on the governance structure of the Shariah Committee in the Islamic financial institutions.

The settlement of a payment by Swish takes place on a platform known as “Betalningar i Realtid, BiR” (payments in real time), which is owned by Bankgirot. Swish payments are thus settled in money issued by a commercial institution and therefore differ from other payments that are settled in central bank money. Another difference between BiR and RIX is that BiR is accessible 24 hours a day, every day of the year, “24/365”. The average transaction in BiR is much smaller than the average transaction in RIX, which is a natural consequence of the payments made with the Swish app being small. However, there are no technological limitations preventing larger payments being settled instantly. But there will then be high demands on the safety of the settlement procedure, and settlement should then be in central bank money. 4 The Riksbank has decided to extend the opening hours for RIX from 0700-1700 to 0700-1800 with effect from  October. 5 Almost all central banks own and operate payment systems with the same kind of functions as RIX. These systems are referred to as “Real-Time Gross Settlement” (RTGS) systems or ”Large Value Payment Systems” (LVPS). 6 Instant payments is the most common term; other terms include “real-time payments” or “faster payments”. For a more detailed description, see The quest for speed in payments, BIS Quarterly Review, March 2017. 7 See Payment patterns in Sweden 2018, Sveriges Riksbank. 3 [8]  ... and in the future?