samchain/econo-pairs-v1 huggingface dataset:
Michael C Bonello: Achieving sustainable growth after the recession Speech by Mr Michael C Bonello, Governor of the Central Bank of Malta, at the annual dinner of the Institute of Financial Services – Malta, Saint Julian’s, 27 November 2009. *  *  *  I would first of all like to thank you, Mr. President, and your Council for inviting me once again to address your members and their guests. Before I do so, however, I must commend the Institute’s growing contribution to the financial services industry. An initiative deserving special mention is the Foundation Degree programme with the University of Kent and the MCAST. Equally important for their role in bridging existing skills gaps are the seminars on specialized subjects such as Fund Administration and Hedge Funds. The Institute’s joint initiative with a leading law firm to produce a series of books on “Maltese Financial Services Laws” should likewise satisfy a felt need in promoting a better understanding of financial legislation. Finally, I would like to mention the Institute’s cooperation with the European Bank Training Network (EBTN), whose representatives are with us this evening. An improving external environment … At this time last year the global economy was entering a severe recession as a result of the shock waves transmitted from the financial markets after the collapse of Lehman Brothers in September. It was only the resolute and timely interventions by governments and central banks that prevented a repeat of the catastrophic consequences of a 1930s-style depression.

In this regard, the Budget for 2010 provides several incentives that are conducive to a stronger productivity performance, particularly concerning SMEs and research and development. Beyond capital deepening, improved prospects for productivity growth also require a heightened awareness that inefficient work practices, including over manning, slow down output growth and threaten the sustainability of employment and income levels. The concept of value for money that is increasingly determining consumer behaviour should be given equal importance in the workplace. There also exists potential for creating a more congenial business climate to reinforce Malta Enterprise’s investment promotion strategy. In a recent survey of corporations, a reduction in bureaucracy topped the list of measures that were considered necessary to further enhance Malta’s attractiveness as a location for foreign direct investment. 3 Education policies, too, can play a role by strengthening the country’s human capital, particularly by promoting greater synergies between educational institutions and industry. In assessing the role of productivity, it is well to reflect on the words of the Nobel laureate Paul Krugman, who said “productivity is not everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker”. 4 … and sound public finances The third policy priority is to achieve sustainable public finances. The process of fiscal consolidation must resume in earnest once the recovery materialises.
As stated, one aspect of recent developments that should be assessed is the fact that much of the adjustment in results is due to expectations of loan impairment provisions that have not yet materialised but will do so in the coming quarters, allowing these provisions to be appropriately distributed over time. In fact, the downturn in economic activity caused by the pandemic has so far only fed through moderately to non-performing loans, with but a slight rise in Q2 which, given the high growth of credit, has provided for additional reductions in the NPL ratio. Recurring income has already begun to feel the effects but, so far, expenses have also adjusted downwards. The downturn in banks’ profitability has not yet led to a reduction in their solvency. Indeed, in the first half of the year, solvency has increased slightly. That highlights the significance of the measures adopted by economic policymakers in their respective areas. The recommendation not to pay out dividends has enabled banks to add these resources to their capital buffers, the numerator of the solvency ratio. Further, risk-weighted assets, the denominator of the solvency ratio, have fallen owing to the use of the guarantee programme and to the rapid changes to European capital rules in late June. These amendments were dubbed “Quick Fix”, and I shall refer to them later. The ECB’s decisions, for their part, have helped keep very loose financing conditions for banks in place. But this situation must not lead to complacency.

Speech at the Press Conference: Collaboration on Adopting Standardized QR Code for e-Payment Dr. Veerathai Santiprabhob, Governor Wednesday 30 August 2017 Bank of Thailand ……………………………………………………… Executives from American Express, JCB International, Mastercard, VISA and UnionPay International President of Thai Bankers' Association President of Government Financial Institutions Council President of Association of International Banks President of Thailand Electronic Payment Trade Association President of the Telecommunications Association of Thailand under the Royal Patronage Press members and distinguished guests, I am very pleased that all payment service providers in Thailand are here to announce their collaboration on adopting QR Code standard for payments. This is considered an important milestone for which the standardized QR Code has been implemented in Thailand. It is also the first time that five international payment card network providers and Thai financial service providers have mutually agreed to adopt the same QR Code standard in providing payment services in Thailand. It is recognized that electronic payment (e-Payment) is a crucial component in driving a digital economy, where technologies have been utilized to deliver better services for consumers and businesses, to increase financial inclusion, to raise efficiency and to reduce costs; thus, enhancing the country’s competitiveness and supporting ‘ease of doing business’ principle.
Yet at the same time, he saw possibilities: “Successfully solving them in a satisfactory manner will undoubtedly have far-reaching consequences in the economic and financial spheres, and the year might end better than it began.” While times are difficult abroad in our day too, there are bright spots. Growth in Asia remains robust and some figures for the US economy have been positive recently. Europe is facing the challenge of remedying economic imbalances in the face of weak growth prospects. For many countries, demographic developments will in a few years add to the pressure on fiscal budgets. While austerity measures will improve government finances, in the short term they will stifle activity and delay a recovery. This is a very difficult balancing act. But euro area countries have no choice. There is a need to agree on measures to restore confidence in financial markets. Just like 80 years ago, it is difficult to predict where we are heading. The Norwegian economy should be able to hold a steady course. But we will have to take into account that the return on the Fund’s investments may be lower than expected a decade ago. And wage and price inflation is likely to be low for some time to come. Rygg’s hopes were partly realised. In Europe the crisis bottomed out in 1932. Cycles and confidence may shift rapidly and when we least expect it. After hard times come good times. Come what may.

If the return on the Fund actually proves to be 3 percent, we will have drained almost NOK 1 trillion from the Fund over the next 20 years with the current 4 percent rule. This corresponds to the value of the large North Sea oil discovery in the Johan Sverdrup field. The phasing-in of petroleum revenues through the public sector has the effect of crowding out exposed sectors. Even though petroleum revenues are phased in gradually, a phasingout of manufacturing and other private industries may not be as smooth. Entire industries could be lost. If spending proves to be excessive, such structural changes may be difficult or impossible to reverse. The conclusion is that a more robust approach would now be to base fiscal policy on an annual expected real return on the Fund of 3 percent. Such an adjustment would underpin the main principles that were behind the establishment of the fiscal rule – stability and sustainability. (Chart 10: Structural non-oil deficit and different rules for withdrawal from GPFG) In 2011 the structural non-oil budget deficit was about 3 percent of the Fund, which is close to such a new path. Adapting petroleum revenue spending to a lower expected return should not therefore be particularly demanding. If we wait, a necessary policy adjustment could be far more painful at a later date. 3  See Norges Bank Staff Memo 6/2012.
Spanish banks in Latin America have traditionally operated under a subsidiary model, whereby they are financially autonomous from the head office and they have to comply with the host country’s capital requirements and deposit insurance schemes. In turn, supervisory responsibility is shared between the host country and the home country supervisors. Another factor of resilience behind the business model of Spanish banks in Latin America is their focus on retail banking, which tends to be less volatile and more closely linked to the real economy than wholesale or investment banking. Both the emphasis on retail banking and the principle of financial autonomy of the subsidiaries induce banks to fund themselves primarily through the deposit base in the host country. This reliance on domestic funding has favoured “business as usual” even if the home country was enduring financial stress, and has helped to reduce the financial vulnerability of the host country by mitigating the exposure to external flows. I am aware that even if the subsidiary model has proved its resilience during the crisis, it may involve some costs in terms of liquidity management, and that alternative banking models may have their virtues depending on the nature of the banking business. With due attention to limiting financial vulnerabilities, the question of models for cross-border banking has to be addressed with the necessary flexibility.

As you can see in the programme, there will be three sessions which will take up each of the topics I have just addressed. Each session has been organised as a panel discussion so as to facilitate the presentation and exchange of different views, with three panellists from both sides of the Atlantic. After each panel, we have allotted sufficient time for an open general discussion. Finally, at the end of today’s proceedings, President Trichet will make the closing remarks of the Seminar. I hope we will have an intense and very productive day’s discussion. Without further delay, I give the floor to my friend Governor Carlos Costa, who will chair the first session of the seminar on global rebalancing. Thank you  BIS Review 172/2010  5
But I think that over the coming years, we should continue to explore ways to encourage institutions to improve the way they collect and use internal information to run their business and manage their risks, as well as the possibilities for harnessing and using this information as regulators. 4  Increased feed-back to reporting institutions  So far, I have mainly talked about initiatives which regulators can take that should have the impact of reducing the costs of producing financial information. But I think it is possible to go further than this. In fact, I think that we can take initiatives that actually give something back to the reporting entities - in other words, initiatives that provide them with clear benefits. This is the fourth element that I wanted to mention, and perhaps is best explained with a couple of examples. Let me take my first example from the Spanish context. In Spain, as in some other countries, we maintain a central credit register. This contains information about all the direct and indirect credit exposures – i.e. loans and guarantees – with a value of € or more, which have been granted by banking institutions and other lenders to their clients. As a central bank and banking supervisory authority, we use this database to assist us in evaluating macro-prudential trends and the credit risk in the economy as a whole. Of course, the data doesn’t get into the register of its own accord but rather must be reported by the lending institutions.

Earnings are obviously following the same trend as in 2007 and reflect the persistent effects of the risks associated with the subprime crisis, with valuation losses on assets and higher risk-related costs. A compound indicator, such as ROE shows a decline in profitability, but it still stands at an average of 14 per cent, compared to 18.9 per cent for the three largest banking groups in the first quarter of 2007. On this point, I would like to put this decline into context. It follows several years of exceptional profits, which raised questions about their sustainability. Despite declining income, the French banking system is still financially sound: the Tier 1 solvency ratio based on original own funds stood at an average of 7.1 per cent for the three largest banking groups at the end of 2007, much higher than the minimum ratio of 4 per cent set under Pillar 1 of the Basel II Accord. Banks increased their solvency ratios in the first quarter of 2008 and the Commission Bancaire attaches a great deal of importance to this effort. The benefits of business diversification, the effectiveness of the measures taken to limit risk exposures and the satisfactory capital levels have also enabled the major banking groups to remain highly rated by the leading international agencies. 2  BIS Review 82/2008  2. The current economic situation calls for vigilance nonetheless, since banks must be ready to cope with new risks that may occur at any time.
As a result, many countries have been able to bring down inflation at virtually no cost. In this respect, we can probably talk about some degree of endogeneity in inflation. However, it is still the non-trivial task of monetary policy to ensure that inflation remains low and stable on a more permanent basis. In a country with its own national currency, inflation is not something that just drifts in with the wind from abroad. It is the monetary policy choices we make that determine price developments over time. As Ken Rogoff, professor of economics at Harvard University, has so aptly phrased it: “…any central bank, no matter how small or open its economy, can always stabilise domestic prices at medium- to long-term horizons, should it choose to do so…Globalisation may affect the parameters of central bank models, but independent central banks still control their own inflation destinies…”. 8 For some years now, the short-run trade-off between inflation and economic growth has been extraordinarily favourable. Inflation has been low and economic growth high. We have been hit by massive and long-lasting positive supply shocks thanks to the globalisation process. To accommodate a higher growth potential and to maintain the nominal anchor, central banks worldwide for a long period held short-term interest rates well below what can be regarded as a normal level. Furthermore, long-term real interest rates have declined markedly since the 1980s and the beginning of the 1990s and have been especially low in recent years.

The UK Government has already introduced a range of measures to underpin the banking system, including requiring the injection of additional capital, guaranteeing bank debt and providing insurance against losses on some of the risky assets on banks’ balance sheets. That has served to stabilise the banking system. But we are still some way from having banks that feel sufficiently secure that they can lend normally, and investors that have enough confidence in the banks to provide them with sufficient funds. The Bank will continue to work alongside the Government and the FSA in trying to ensure an adequate flow of funds to business. Unfortunately, past experience in other countries suggests that it often takes time for the banking system to mend after a crisis, and it is possible that the supply of credit will remain impaired for some while. There are two reasons for optimism about the strength of the recovery. First, we have the advantage of a substantial depreciation in sterling, whose trade-weighted value is about a quarter down on its value before the crisis broke. That should encourage buyers to switch to goods and services made in this country and make it more profitable to produce them. As a result, it should facilitate the necessary re-balancing of the economy. Second, an unprecedented policy stimulus is working its way through. In particular, the Monetary Policy Committee has lowered Bank Rate to 0.5%, a level unmatched in the Bank's 315-year history and only marginally above its floor of zero.
I would now like to address the objectives that we are yet to complete. The most pressing problem is lending to business owners. The standard N25 restricting financing of one’s own projects was introduced this year but is still only applied in a preferential mode. Lending to owners is dangerous for two reasons. First, the bank will turn a blind eye to risks linked to its own company when issuing it a loan i.e. the risk of non-return. Second, our practice has shown that if the owner’s project really experiences difficulties the last place it returns money is the affiliated bank. These are not marketable loans but loans extended by unwritten rules. Banks cannot refinance or resell them. In the end, this is the cause of bankruptcy for many banks. It is one of the factors that led to the collapse of relatively large banks, whose licenses we revoked. We want the banking community to know that our intentions in this field are serious and we will continue to take a tighter stance. Therefore, I advise those whose business model is built on lending to owners to seriously consider finding alternatives. Yet another problem is the quality of banks’ capital. We need to be confident that our banks have real, not borrowed, capital. Therefore, as of this year we will be introducing tighter regulation on the quality of capital. When calculating a bank’s capital, we will not take funds from nontransparent sources into account. There is another whole host of problems associated with collateral.

For example, big data, riskoriented decision-making systems, credit decisions, the use of complex mathematical models in the risk management system, and working with open interfaces and cloud computing. All this suggests that soon there will be high proportion of risks that are technological in nature rather than financial. We need to be ready to face these risks. Our objective is to elaborate uniform standards for working with databases, data quality, and develop the requirements on models applied in data outsourcing, and requirements on information security. This is a great deal of work. We will develop approaches while engaged in dialogue with the industry. The revolution in the use of data has had an impact on both financial institutions as well as regulators like us, the central bank. We need more data about deals and transactions. Then, we need to use modern data analysis methods. For this, we will optimise the reports that are submitted and introduce formats that are convenient for the market such as XBRL. I would like to highlight the fact that we will be working to improve quality control and data management systems and you will benefit from lower regulatory costs. The last area of work I would like to mention is one of the most important: protecting consumer rights. Our objective in this area is absolutely clear – financial decisions should not lead to misfortune in consumers’ lives.
Allow me to highlight some of our resilient features: •  We continue to have a strong current account position with the current account last year registering a surplus of 9 percent of GDP, or around 35 billion US dollars, thanks largely to a substantial saving on energy imports. •  Our international reserves have been at a healthy level, standing at three times of the short-term external debt we hold. •  Our capital markets are relatively less exposed to the risk of capital flight, with foreign holdings at less than 9 percent of the Thai government and Bank of Thailand bond outstanding, compared with more than 30 percent in some other emerging markets in the region. •  External debt of the Thai corporate sector has been relatively low, hovering around 13 percent of total corporate debt. And, most of the external debt belongs to large corporations which have used the proceeds to finance their investment aboard and are able to manage their exchange rate risks sufficiently well. As a result, the currency mismatch does not pose a threat to the Thai corporate sector, unlike what they experienced during the 1997 economic crisis. Taken together, the strength of Thailand’s external position on many fronts has helped the Thai economy withstand the recent global financial turmoil, and would continue to provide cushions against possible external shocks in the future. Nevertheless, it would be a mistake to be complacent with where we stand and fail to anticipate greater challenges ahead.

Let me first touch upon some of the ongoing reforms and give you a better picture of what we could expect to benefit from them. Among various initiatives to upgrade legal infrastructure in Thailand, steps have been taken to put in place more efficient and more business-friendly laws and regulations. The new Licensing Facilitation Act will help streamline bureaucratic processes in obtaining a business license, registration and approval. The Business Security Act will help improve SMEs’ access to bank loans by allowing more  BIS central bankers’ speeches  3  types of assets to be used as collaterals. The new Payment System Act will unify all related laws governing the payment system and lift its standards to international best practices. In addition, the law to reform the governance structure of state-owned enterprises is underway. The success of this reform will not only improve the performance and transparency of state-owned enterprises (SOEs), but also unlock the potential of our country’s strategic assets, create a more level playing field between SOEs and private businesses, and strengthen the country’s overall competitiveness. I believe that these developments have a great potential to improve administrative efficiency and make doing business in Thailand easier. The legal reform will be here to stay regardless of which political party comes into power after the next election. Moreover, with the introduction of changes in the Board of Investment’s criteria for investment privileges, the government has geared up its effort in promoting high value added industries.