samchain/econo-pairs-v1 huggingface dataset:
Further regulation in specific areas where Swedish banks are particularly vulnerable may also be necessary. Here I am mainly referring to the Swedish banks’ extensive market funding, particularly from abroad, which I discussed earlier. And which has in many ways enabled the expansion in the banks’ mortgage stocks. There is international work on producing new regulations in this area, too. When the work regarding the technical details for liquidity regulation is complete, we must also decide how and when the regulations should be introduced in Sweden, taking into account the structure of our financial sector. Don’t forget the supply side In talking about the housing market I have mostly talked about the demand side and how we can ensure a balanced development there. This is what much of the general debate has concerned. But I would like to conclude with some words on the supply side, or housing construction, and what role this plays and has played earlier. While this is something that is fairly often discussed in this context, I nevertheless feel it deserves a little more attention. One of the explanations usually put forward for the high housing prices is that relatively little new housing has been built in the past fifteen years or so (Figure 4). The low level of construction is what is usually termed a “fundamental explanation” of the upswing in house prices. And this is probably true.

I spoke about this at length in a recent speech in Hong Kong, and I refer you to that speech if you need a sleeping aid this evening.1 The advent of the dots The intense focus on when we are likely to raise the overnight rate is understandable. I was a banker in my previous life, before migrating to portfolio management; I spent 20 years in both professions before going into public service so as to “pay it back.” As a banker and market operator, I naturally wanted to eliminate uncertainty as much as possible. The adage “don’t fight the Fed,” was prevalent then, as it is now, so I would garner as much knowledge as possible about future Federal Reserve intentions and moves in order to position my book. Then, we had little information. The FOMC under Paul Volcker did not even announce its decisions, and the market was left to discover them on its own. Later, under Alan Greenspan, the FOMC began the process of releasing information about decisions taken, but any clues as to future intentions required one to divine some signal from the chairman’s almost mystical pronouncements and oracular circumlocution. Chairman Ben Bernanke worked with the FOMC to instill greater transparency under the assumption that providing as much information as we can enlightens markets so as to modulate the possible disruption of surprises and allows decision-makers – from consumers to businesses to bankers and investors – to plan forward.
The Riksbank has been given a statutory task of maintaining price stability and promoting a safe and efficient payment system. The Riksbank has specified the monetary policy objective as a rate of increase in consumer prices, measured as CPI inflation, of 2 per cent, with a tolerated deviation interval of plus/minus one percentage point. The most important instrumental rate, the repo rate, is the instrument normally used by the Riksbank to maintain price stability. Our monetary policy strategy can be described in a simplified manner using the rule of thumb that when an assessment indicates that inflation one to two years ahead will deviate from the target level, the instrumental rate is adjusted. The Riksbank's assessment of future inflation is communicated, for instance, in the Inflation Reports published four times a year. The Riksbank has chosen to maintain the inflation target in a medium-term perspective. One reason for this is that monetary policy affects inflation with a significant time lag. An attempt to ensure that inflation also develops in line with the target in the short term would probably require much larger changes in the instrumental rate and thereby contribute to excessive fluctuations in demand and employment. The fact that the inflation target is worded in terms of a medium-run perspective also helps tone down the significance of temporary price changes. The unexpectedly high inflation rate last year can partly be explained by a number of transitory factors.

However, the picture of the global economy is nevertheless much brighter than it was in the autumn and the signs of a turnaround are becoming more distinct. Developments in Sweden The signals of a general recovery in Sweden have also become more tangible. According to Statistics Sweden's sales index, the retail trade's sales volume rose in January, compared with December 2001. During the most recent three-month period (November-January) industrial production and order intake  2  BIS Review 25/2002  had increased, compared with the immediately preceding three-month period. The manufacturing industry is optimistic with regard to the coming months and the retail trade is expecting sales statistics to remain high, according to the National Institute of Economic Research's economic barometer. The expansionary fiscal policy contributes to a strong development in households' disposable income and forms a basis for both higher private consumption and increased savings. Exports increased gradually during the period, but relatively cautiously, both because the international upturn in activity is rather tentative to begin with and because the krona is expected to appreciate. According to the Inflation Report, GDP was estimated to increase by 1.6 per cent this year and then accelerate to between 2.5 and 3 per cent in the coming years. Despite the weaker demand last year, employment continued to develop strongly and unemployment declined slightly. Both the number of hours worked and the number of those employed increased during 2001. Part of the favourable development in employment may, however, stem from the increased absence due to sickness.
6  The higher profit margins of the past two years need to be interpreted carefully as they in part represent a rebound after the contraction in 2008-09, and are related to composition effects and capital deepening via labour shedding. 7  See ECB Structural Issues Report (2012), Euro area labour markets and the crisis, ECB Occasional Paper No 138, October 2012. 8  On average in the three Baltic states compensation per employee fell by 10.4 pp cumulatively between 2009 and 2010. 4  BIS central bankers’ speeches  [Slide 8] What about output? Per capita GDP has been falling steeply in Greece. In Ireland the turning point was reached in 2011; in Spain, Portugal and Greece that point is expected to come in 2013 or early 2014. Is this expectation credible? Controlling for exogenous variables, such as world demand, term-of-trade or oil shocks, the expectation depends on a resolute pursuit of the reform and consolidation policies as well as on three key interrelated aspects: the impact of fiscal consolidation; the access to finance for corporates and households; and the restoration of confidence. Let me consider these in turn. Since the sovereign debt crisis escalated in mid-2010, in the stressed countries the fiscal stance has become very restrictive, access to finance has become very limited and confidence very low. In such an environment it is not possible to isolate the short-term impact of these three elements while private and public sector balance-sheet adjustment is under way.

In particular, some of the job losses in the non-tradable sector are the outcome of the necessary rebalancing towards tradables and away from previously unsustainable domestic demand growth. However, the rise in unemployment in a number of countries has been aggravated by delays in structural reforms and, as I said, by a lack of downward flexibility in prices and wages after 2008. Job losses were largest among low-skilled, temporary workers in Spain and in the non-manufacturing sectors.7 As employment fell, unemployment – particularly of the young – jumped, especially in Greece and Spain, where more than a quarter of the total labour force is currently without a job. There was also a sharp increase in unemployment in the Baltic states – it rose from 5% in 2007 to 18% in 2010 on average in Estonia, Lithuania and Latvia. However, since 2010 in all three countries unemployment has fallen relatively quickly. By the end of 2012 it had improved by about 10 percentage points.8 In the most stressed euro area countries, there are no signs of a reversal yet. This is the result of the inherited very rigid product and labour markets, which have started to change and need to continue to do so vigorously to prevent further job losses. Again, this is not only a matter of efficiency, but also a matter of equity. Europe cannot afford a lost generation. 5  See ECB Monthly Bulletin Box (2012), Rebalancing of competitiveness within the euro area and its implications for inflation, June 2012, pages 64–66.
In this context, I find the recent initiative of the European Banking Federation for a self-imposed calendar for reducing the level of such fees extremely promising. 4  BIS Review 91/2001  Steps are also being taken in the field of consumer protection legislation. The aim of the recently launched revision of the Consumer Credit Directive is to promote transparency and to ensure that cross-border credit can flow in harmonised conditions for both consumers and lenders. Also, a report on the regulation of e-commerce in financial services has just been launched by the Commission. It draws attention to the problems that arise from the interplay between different legal systems and makes proposals to overcome them. At the supervisory level, the Economic and Financial Committee has stressed the need to work on the convergence of diverging national supervisory practices. The main motivation is to enhance the efficiency of the national supervisory authorities involved in monitoring cross-border financial institutions and thereby to improve financial stability. This is also linked to the new framework for capital adequacy rules being developed by the Basel Committee on Banking Supervision that will significantly increase the scope for supervisory discretion, leaving broad room for diverging implementation across Member States. Thus, demand for supervisory convergence is going to increase. To the extent that this is accomplished, the costs of banks with multi-country operations will also become lower.

Ajith Nivard Cabraal: Importance of corporate governance for the banking and financial sector Keynote address by Mr Ajith Nivard Cabraal, Governor of the Central Bank of Sri Lanka, at the 9th South Asia Management Forum, Dhaka, 24–25 February 2007. *  *  *  What is governance and why have governance? Governance may be said to be all about effective, transparent and accountable administration of affairs of an institution by its management, while protecting the interests of its stakeholders including shareholders, creditors, regulators and the public. Modern Corporate Governance practices have evolved over time and different codes of best practice on Corporate Governance have been developed by various organisations. E.g. the OECD code of Corporate Governance, the Basel code of Corporate Governance for banks and financial institutions, etc. At the same time, several fundamental Corporate Governance Principles have now evolved and have received worldwide acceptance, and guidelines under each such principle have been comprehensively developed by Corporate Governance activists, practitioners, researchers, and others. These principles generally relate to the responsibilities of the Board, Directors, Chairmen, CEOs, senior management, Board appointed committees, auditors, shareholders and regulators. Accountability, internal controls, related party transactions, conflicts of interest, information disclosures have also been extensively dealt with and targeted in the formulation of these principles. Corporate Governance principles had its origins in the 19th century although the term Corporate Governance itself came into vogue in the latter part of the 1980s.
Over the longer term, the instability, whether inherent or not, would decline if we have more developed financial and capital markets and also, by default, a multi-currency system as they reduce the risk concentration on one individual financial market and currency. Conclusion In closing, I believe that policymakers over the world need to focus our effort on all aspects of policy challenges in parallel including surveillance, financial market developments, regulations, and risk management. I strongly believe that market players respond to policy incentives and therefore policymakers have the responsibility to put the right policy and incentives in place. There is no quick fix and it will take a long time and painful adjustment before countries that were at the epicenter of the global crisis can resume normalcy. In Asia, we have taken a decade to strengthen our economic resilience. Because of our past efforts, we have been able to weather this crisis relatively well. That said, our work in Asia is still ongoing to strengthen the policy framework and tools to deal with future crisis that will surely not be the same as the last. Importantly, we are mindful that the world will have much less fiscal space to cushion potential global contraction, should the next crisis hit. While it may be easier to advance these efforts at the national level, achieving policy coordination on the global level will be much more difficult.

As in the case of sub-prime markets, risk awareness was not adequate by suppliers and demanders of financial instruments and no preemptive action was taken despite some very risky characteristics. The responses by crisis countries to prevent the next crisis were no different from what Asian economies did more than ten years ago. The calls made by the G-20 Leaders include putting more focus on financial stability, strengthening financial sector regulations and supervision, enhancing surveillance mechanism at both individual and international levels, especially more effective surveillance role and liquidity support by the IFIs, particularly the IMF, just to mention a few important initiatives. Please allow me a few comments on a few issues that I’d like to highlight. What has been done and what more needs to be done Effective surveillance: being good global citizen One of the immediate responses to the crisis has been to strengthen effective surveillance capacity at national and international levels. We are of course on the right track in this effort to create a more robust and effective surveillance system with a view to ensuring timely policy actions. Tackling the problem at an early stage not only helps lessen the chance that micro shocks can adversely affect the macroeconomy, but also safeguards against spillovers from one country to the rest of the world. In today’s globalized world, this spirit of good global citizenship is essential.
Our collective efforts, along with developments in information technology and risk management techniques, have already contributed to improved market stability. The growing, and successful, commitment of central banks to the achievement of price stability as BIS Review 60/1997  -7-  their primary goal is another crucial and positive contribution toward market stability. Moreover, where we as central banks see gaps that develop in the global financial system, as we did in the areas of market risk and settlement risk management, we play the role of facilitator to private sector solutions. As central bankers, we tend to view our role in the global financial markets as ensuring that the necessary infrastructure is in place to promote well-functioning markets for all players. Then we step aside and let the markets take care of themselves. BIS Review 60/1997

As in G7 Working Group on Stablecoins, October 2019, ‘Investigating the impact of global stablecoins’. https://www.bis.org/cpmi/publ/d187.pdf 7 The PRA may require subsidiarisation where firms have material retail banking operations. In making that judgement, the PRA takes account of the value and type of retail deposits and the extent to which they are covered by the FSCS. We expect branches to have under £ of retail deposits, and also take account of the number of depositors and the number of retail and small-company customers with transactional accounts. See: SS1/18, ‘International banks: the Prudential Regulation Authority’s approach to branch authorisation and supervision’.https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisorystatement/2018/ss118 6  6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  banking and traditional payment systems, the regulatory response must be grounded in internationallyagreed standards. Global issues require a global response, particularly for multi-currency stablecoins intended for cross-border transactions. Along with the G7, the Financial Stability Board has been leading co-ordination of the international response to global stablecoins. The FSB consulted in April on the regulatory and supervisory challenges they present, with a final report due in October, and the Bank of England supports the efforts to set a baseline set of expectations. These include that stablecoins should be regulated based on the functions they perform and risks they create, and that there should be comprehensive domestic and international regulation and supervision. Global stablecoins should have robust governance and risk management, and be transparent about their stability mechanisms and coin-holders’ rights.
With close to 120,000 employees 8 in 2014, the banking sector is a major employer. The size of the banking sector, as measured by the ratio of total assets to GDP, is high by international standards. 9 Macroeconomic stability is thus a long-term asset for Switzerland. Low interest rates make borrowing conditions for firms and households cheaper. This leads to higher investment and supports the real sector. Macroeconomic stability is not only a precondition for sustained economic growth, but has helped to build a stable and robust financial sector. It is the longterm stability, combined with high quality work, which has helped create ‘brand Switzerland’. The Swiss financial sector has not only benefited from this brand but also contributed to its international propagation. However, long-term stability can sometimes be associated with short-term costs. As a small open economy, Switzerland can be subject to short-term exchange rate volatility resulting from the safe-haven status of its currency. The costs of this volatility are substantial at times. Strong fluctuations in the Swiss franc have had major effects on the Swiss economy in the past. For example, in the early 1990s, during the European Monetary System crisis, the Swiss franc appreciated strongly against European currencies. The entire economy had to adjust to a strong currency. More recently, Switzerland has been particularly heavily affected by international disturbances since the beginning of the financial crisis. The Swiss economy and its inflation outlook have been subject to strong downside pressures, due to massive exchange rate appreciation, weak international demand, and volatile financial markets.

With both foreign and Swiss interest rates close to zero, the spread between euro and Swiss interest rates disappeared. This created upward pressure on the Swiss franc. A narrower interest rate differential acts like a bonus on Swiss franc holdings. The appetite for Swiss franc assets increased among both foreign and Swiss investors. In the context of a financial and debt crisis, and in a world of high geopolitical risks, a narrower interest rate differential makes the Swiss franc particularly attractive for investors. At the same time it is important to recognise that the current situation cannot be compared to that of 2011. At that time, the Swiss franc was appreciating strongly against all currencies, and, as a response, we introduced the minimum exchange rate. Now the situation is characterised by a general weakness in the euro. Thus, at the end of 2014 and the beginning of 2015, the euro lost substantial value, not just against the Swiss franc but also against other important currencies such as the US dollar and the pound sterling (cf. chart 5). In this new environment, we introduced negative interest rates to partially restore the traditional differential between interest rates on euro and Swiss franc assets. Monetary conditions were adjusted, as the monetary policy stance relative to that abroad had changed. With short-term interest rates in the euro area at zero, negative Swiss interest rates helped restore, at least partially, the pre-crisis interest rate differential.
Their financing as well the deterioration of budgetary balances due to the operation of the automatic stabilisers in the wake of the economic downturn, and the aforementioned bank support measures imply that the fiscal deficit for the euro area as a whole will surge, from 1.9% of GDP in 2008, to 5.3% in 2009 and further to 6.5% in 2010. 12 The dynamics of public debt are equally striking. Compared to last year, the debt burden of euro area countries will grow by almost 9% of GDP this year, from 69% (2008) to almost 78% (2009). These are worrying developments, especially when bearing in mind that this deterioration of public finances in the span of only one year wipes out the consolidation efforts of euro area governments of an entire decade. 13 By mentioning these figures I do not wish to deny that the current focus of fiscal policy on supporting the economy’s recovery is not justified. At the same time, due attention should be paid that current actions do not undermine the public’s trust in the long-term sustainability of public finances and the integrity of the EU fiscal framework. Governments have to have a credible commitment to achieve sound fiscal positions as soon as possible and should fully apply the provisions of the Stability and Growth Pact. Otherwise, we may face a serious risk that the current economic and financial crisis will evolve in the years to come into a fiscal crisis of major proportions.

For example, the level of the six-month Euribor rate at the beginning of this week (1.46%) was only somewhat higher than the corresponding Libor rate (1.22%) in the US dollar money  5  The effects of asymmetric information and counterparty credit risk on the structure of the interbank market and various policy responses are analysed in Heider et al. (2009). 6  Over the past few days, the EONIA rate has temporarily risen above the rate of the ECB’s main refinancing operations. This is due to changed behaviour on the part of banks showing reduced demand for ECB liquidity. This has temporarily diminished the levels of excess liquidity, thus driving up the EONIA rate. During the ECB’s most recent refinancing operation, banks have reacted by increasing their demand again, and EONIA can be expected to drop below the main refinancing rate. Overall, however, the gradual reduction of the level of excess liquidity demanded by banks is an encouraging sign pointing towards the progressive normalisation in the functioning of the money market. 4  BIS Review 65/2009  market. 7 Therefore, effectively, over the past seven months, conditions in the euro area money market have improved substantially and they are broadly comparable to those in other major money markets, despite the higher level of the key policy rate of the ECB (the interest rate on the main refinancing operations (MRO) of the ECB).