samchain/econo-pairs-v1 huggingface dataset:
Liberalisation has brought about major changes in the local banking scene. From six local bank groups (not counting 1 POSBank) in 1997, we are now down to three through mergers and acquisitions. More importantly, the local banks have rationalised their operations, upgraded their risk management systems, and introduced new products and services. The recent housing loan price war is an example of consumers benefiting from more banking competition. But fiercer competition has also inevitably meant that small accounts enjoy fewer cross-subsidies, and have to bear higher charges and tighter usage limits. The Basic Banking Account scheme will help reassure consumers that necessary reforms will not leave them without banking services. Overall, our banks face tougher challenges than before – fiercer domestic competition, greater uncertainties in the region, more complex operations, and stronger pressure to improve returns. Perhaps the local banks sometimes look back on the good old days with nostalgia. But we had no choice. The old dispensation was not sustainable. Even the present situation may not last. Certainly, the local banks have built up their size and regional footprints. They are now the three largest banks in Southeast Asia. But will this be enough for them to hold their own against bigger 2 players? Our largest bank, DBS, is only ranked 86th in the world in terms of assets . Australia has a “4-pillars” policy that discourages consolidation amongst its major banks. But Singapore has not established its own “3-pillars” policy, and most probably cannot afford one.

This has enhanced our understanding of the commercial environment and invigorated our organisation. Just as MAS has gained from such insider insight, industry too needs its share of talent. Through the mixing of talent between the public and private sectors, industry will also come to understand the intent and thinking behind MAS’ policies and actions. Over time, this will lead to a healthier and more constructive relationship where MAS and industry together work toward developing Singapore as a world-class financial centre. Enhance market discipline Fourth, we need to continue to enhance market discipline. The easy part is to establish and enforce the right rules for disclosure and corporate governance. Getting companies to internalise and abide by the spirit of tighter rules will take longer, though our standards of disclosure are already quite good compared to other countries. The most difficult part will  BIS Review 62/2002  7  be enhancing consumer education and awareness, without which, as I noted earlier, disclosure and caveat emptor cannot work. We do not need to convert the entire population into Chartered Financial Analysts. But we must help the public to understand basic finance and investment concepts, and to make effective use of the information that is available. They also need to understand that investing is for the long term and should be based on fundamental analysis. This requires a collective effort on the part of MAS, industry bodies and consumer groups.
Per Jansson: How do we stop the trend in household debt? Work on several fronts Speech by Mr Per Jansson, Deputy Governor of the Sveriges Riksbank, at the SvD Bank Summit, Stockholm, 3 December 2013. *  *  *  Accompanying figures can be found at the end of the speech. The original idea of the organisers was that I would talk about the current situation from a monetary policy perspective. However, wanting to focus instead on questions of principle, I was able to persuade them to let me do so. Now, it may not make much difference in practice, as the current monetary policy debate in Sweden so largely concerns questions of principle. I intend to start by looking back at how the Swedish economy has developed since the financial crisis broke out around five years ago, as well as at the debate about monetary policy during this period. I will then look ahead and give my views on the new policy area, macroprudential policy, and what I believe we need to do to escape the situation that has arisen with a high and increasing level of debt in the household sector and a persistent upward trend in housing prices. The conclusions we draw from looking back are important, as they may affect our view of what is the appropriate future course of action.

Policy clearly within our mandate Another argument that I think is fairly difficult to understand is that the Riksbank, because of the policy we have conducted, should have acted beyond our mandate and done something we should not have done. Sometimes it has been claimed that we have introduced a new target for monetary policy or that we have begun to conduct housing policy. Had we only kept to our task, monetary policy would have been more expansionary, we would have come  2  See Svensson (2013). 3  I discuss this question in greater detail in Jansson (2013). BIS central bankers’ speeches  3  closer to attaining the inflation target and everything would have been much better, the story goes. But as I have already said, the purpose of the policy conducted in recent years has been to create the conditions for a sustainable development in the Swedish economy by reducing the risk of excessive debt and inflated housing prices. After a number of years of rapidly-rising house prices and a build-up of debt among households, it became clear in many countries that developments were based on overly optimistic calculations. When housing prices fell, household assets declined in value rapidly, but the size of the loans remained the same. Households in this situation have reduced their consumption and begun to save to achieve a better balance between assets and debts.
In every meeting with you, I will highlight the need of strengthening the control on the business of the institutions you are governing. In addition to the fact that only this way the personal philosophy of each of you with regard to the development of the institution will come true, this process is vital to the well-functioning and safety of its business, even more given its rapid growth. In this context, the control structures should act rightly and extend to all the bank’s activities. Given the absence of a good collection, processing and reporting process of the business data, the control process on the institution’s activity finds itself jeopardized. The process of the banking sector’s data collection and processing has improved over the recent years as a result of investments in modern technological systems. In many cases, however, it is observed that the adoption of these systems is made only partially and hastily. Their full potential is not used and the banks’ personnel may not be fully familiar to their use; hence, weakening the necessary human control on these systems. Consequently, the control process on the institution’s activity is segmented, and the process of data collection, processing and reporting at the required quality and time is hampered. As a result, you being heads of commercial banks and us the system’s regulatory authority, risk to take decisions on data which are not fully accurate and furthermore are “old”. Being present in different banks and in different levels, a final solution should be found to this issue.

You must re-evaluate the securities’ portfolio quality, in particular that in foreign currency, in order to attain the optimum characteristics of safety and tradability. In addition, the portfolio of placements in foreign currency in the form of deposits or related products with international financial institutions should have as its main objective the safety of the investment and the adequacy of maturity term. In a broader context, you should reassess the adequacy of certain indicators’ level in terms of differences in maturity terms and the type of currency of assets and liabilities. Assets’ quality, which is mainly affected by the quality of loan portfolio, remains a constant risk to the banking business in general. The reduced quality of assets does not only impair the institution’s income, but also harms its liquidity position. In the case of the Albanian banking sector, the loan portfolio quality has been decreasing, although at gradual rates, and the situation is presented as entirely manageable. The rapid growth of credit and the challenges certain sectors of the economy that have been lent significantly may be faced with, are factors that will continue to exert pressure on the loan quality in the near future. Hence, it is crucial for you to implement a policy of rapid detection of non-performing loans and promptly create reserve funds. It is for this reason that the Bank of Albania will increase the frequency of controls and the efficiency in monitoring and checking this process.
7  Page 8 sur 12 Today, we can see how problematic this statement is. We do not only need to make these resources (and ecosystem services) visible to the economic discipline (including through price signals), we also need to engage in a self-critical assessment to understand how the discipline may need to revisit some of its own assumptions to embed itself in nature. All this means that, if we really want to understand the macro-financial criticality of nature, we will need to engage in more conceptual and even philosophical debates. In other words, we cannot solve a problem with the mindset that contributed to generating it in the first place. 3. Central banking in the Anthropocene: some initial thoughts towards re-embedding our economic and financial systems within planetary boundaries What should we do, then, to re-embed economic and financial systems within our planetary boundaries? While I do not pretend to have the answer to such a question, let me open up a few avenues. As central banks and supervisors concerned primarily with price and financial stability, the first thing we can do is delve further into the assessment of financial risks, while being aware of the limitations of such an exercise because of the points I raised earlier. But perhaps we could at least be informed by some of the issues I discussed, and be willing to explore new frontiers.

For instance, we are currently facing a massive loss of biodiversity, to which some scientists refer to as the sixth mass extinctioniii and the first one caused by humankind. Indeed, the figures are daunting: according to the last WWF Living Planet Reportiv published this month, the world’s wildlife populations have declined by 69% on average since 1970. Other distressing biophysical patterns beyond climate change and biodiversity loss include pressures on freshwater availability and soil erosion. There is at least one conceptual framework to understand our multiple and interconnected ecological degradations, that of “planetary boundaries” developed by Johan Rockström and his colleagues.v These scientists identified and started to quantify nine planetary boundaries, which correspond to nine Earth subsystems or processes that define the “safe operating space for humanity”. Crossing certain thresholds (for instance, when there is too much CO2 concentrated in the atmosphere, or when biodiversity loss reaches a certain point) can trigger irreversible and massive consequences. These are the famous tipping points: when exceeded, specific Earth subsystems can irreversibly shift toward a new state, with potentially devastating consequences for human populations, let alone for ecosystems and other forms of life. For instance, evidence is mounting that tipping points related to the loss of the Amazon forest could occur more rapidly than previously thought, and have consequences on several planetary boundaries.
the young workers), that, as a result, carry extremely large economic and social costs. This is socially unfair and economically inefficient. European countries must made more efforts to resolutely pursue – and with far greater urgency than in the past – the necessary structural reforms in product markets, labour markets, pension systems and so on. In this respect, a key contribution to the strengthening of the euro area’s long-term economic prospects will come from the thorough implementation of the Europe 2020 strategy, with its focus on key areas such as: (i) education, research and innovation; (ii) resource efficiency; and (iii) high levels of employment and social cohesion. III. (c)  Enhancing the crisis management framework  In response to the sovereign debt crisis, the euro area has recently armed itself with an important tool to safeguard area-wide financial stability. At the European Council meeting of 24 and 25 March 2011 the Heads of State or Government of the EU agreed to establish a permanent European Stability Mechanism (ESM) based on the existing temporary European Financial Stability Facility (which will remain in place until June 2013). The ESM will grant financial assistance to countries in distress in the form of credit, with the assistance provided under strict conditionality and on the basis of a strict analysis – conducted by the European Commission and the IMF, in liaison with the ECB – of the sustainability of the relevant country’s debts. The establishment of the ESM represents an important addition to the institutional fabric of EMU.

While still low by historic standards, it is 100 basis points above its previous level. And we must add to this rise in the Treasury bond rate the increase in the foreign credit premiums facing the emerging economies. Emerging markets’ currencies have depreciated substantially against the US dollar, and their market capitalization is lagging behind the advanced economies’ stock markets. The external financial conditions facing our economies are entering a normalization stage, but they are still favorable from a historic perspective. In short, after six years since the outbreak of the global financial crisis, international conditions are returning to normal. This scenario implies that most Latin American countries, including Chile, will be getting a weaker impulse from abroad at least in the short run, due to  BIS central bankers’ speeches  1  the drop in the terms of trade and the more stringent external credit standards. Still, over the medium term, a recovery of developed economies’ growth is certainly good news. And much more so, if we consider that a persistent “easy money” era may create economic and financial imbalances which, the longer they last the higher the price that has to be paid in terms of economic and balance sheet adjustments down the road. The question is, where do the emerging economies stand to deal with this transition? There is no simple answer to this. Some have used the boom years to consolidate their fiscal accounts, balance sheets and macroeconomic policies.
Consumption needs to be less dependent on perceived wealth gains, and investment to be more diversified, well beyond the construction sector. This will make participation rates more sustained. For what concerns the Spanish financial sector, it has long been a source of strength and national pride for this country. In many respects, Spain can be a leading example for global financial reform. I will say more on this later in my talk. Spain’s financial system has proved resilient to the shock in the early stage of the crisis. Supported by prudent regulation and supervision, the banking system in this country has built dynamic provisioning cushions during good times. And the traditional role of banking, founded on long-term relationships with customers, has largely been preserved. Looking forward, this is an important asset. But a solid future calls for some areas of adjustment in the way the financial industry behaves. The exceptional support of public policies will, at some point, have to be withdrawn. Private sector confidence in the future will need to replace policy intervention as the main spur of growth. The Asociación de Mercados Financieros and its members are an important link in the chain through which confidence will build and transmit to your customers. The obvious prescription for a sustainable return to stability is for many of you to simply look back at your past of prudent and sound management.

This weakened incentives to conduct prudent screening and a thorough monitoring of loan quality. Credit became plentiful and market liquidity expanded at a pace that could ultimately no longer be justified. Looking ahead, three steps will be required to a more resilient system. •  First, the tendency for finance to become pro-cyclical even at a system-wide level needs to be strongly mitigated. The quality and quantity of bank capital and their liquidity buffers have to be improved in good times to provide a sufficient buffer for bank equity when the cycle turns. The cyclicality of market economies is inevitable. But the financial system should not be allowed to amplify swings. •  Second, the transparency of the financial structures needs to be enhanced. Informed decisions by market agents are a key element of market economies. Lack of transparency of financial products masked abuse and led to disaster. Looking into the future, all institutions, instruments and markets of any relevance for systemic stability need to enhance risk disclosure. •  Third, once more, incentives need to be aligned. Market participants – traders, loan managers, risk committees and boards of directors – were given strong economic incentives to focus on short-term profits. Long-term value creation was not a concern in the pre-crisis world. Collectively, this has resulted in excessive risk taking. A reform of the executive compensation schemes and practices is an essential part of our effort to secure financial stability. At the financial level, reform in Europe will follow a two-pronged approach.
Øystein Olsen: Economic perspectives Annual address by Mr Øystein Olsen, Governor of the Norges Bank (Central Bank of Norway), to the Supervisory Council of Norges Bank and invited guests, Oslo, 12 February 2015. *  *  *  Accompanying charts can be found at the end of the speech. An oil-driven economy It is no coincidence that the walls in this hall cover the monetary history of modern Norway. The exhibit begins with the speciedaler from 1817 and continues up to the current banknote series. Money is at the core of central banking. The central bank’s task is to ensure the availability of means of payment and to preserve trust in the value of money. Low and stable inflation is the primary objective of monetary policy. People must also be assured that banknotes are genuine. It has become increasingly difficult to prevent the counterfeiting of banknotes. The current banknote series is due for replacement and work on a new series is well underway. The new banknotes are intended to function as a calling card for Norway. The choice of the sea as the theme embraces both our past and present. We have always made good use of the opportunities the sea has provided. It has been our lifeblood, and it has been a main artery. Fishing, shipping and trade have been a source of livelihood for many. With its changing face and magical power, it has also inspired artists.

The problem became rather apparent thanks to the GFC, which witnessed cases in which bank managers took excessive risks or otherwise breached the trust of their customers in the pursuit of profit and bonuses. In some infamous cases, such as AIGFP and Merrill Lynch, sizable bonuses, funded by taxpayers’ money, were still paid to managers even though their actions had arguably contributed to the failure of the firms. This “heads I win, tails you lose” regime in modern banking is clearly a recipe for disaster and can do very little to help enhance the trust and reputation of bankers. 8. Another material change in banking from the “good old days” is the problem of what I call “short-termism” amongst some bank shareholders (“impatient capital” focused only on bolstering their own short-term returns). It has also become increasingly common for senior bank managers, especially at the top levels, to be hired on contract basis. While this might be justifiable from the point of view of hiring the best talent available in the market, it could have the unfortunate side effect of cultivating short-termism amongst senior bankers if they only work for a contract or two and therefore must deliver tangible and quantifiable financial results within a short period of time, such as a target RoE. In essence, like football managers, they survive on their reputation for delivering fast results during the current league season. The problem has been exacerbated by two more factors.
Not only has an unusually wide divergence in cyclical positions opened up that creates immediate strains, but there are also important structural imbalances that have developed that must be addressed. I will close by turning my attention to what can be done to address these cyclical and secular challenges. Although I will discuss the role of U.S. monetary policy in this context, I will also discuss what other steps can be taken to strengthen the relationship and make it more sustainable. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. Over the past few decades, the most salient feature of the global economy has been the growing importance of the emerging market economies and the ever-deepening integration of these economies into the global economic system. A shift toward more market-based and outwardly oriented development on the part of the EMEs has enabled hundreds of millions of people across the emerging world to become integrated into the global economy for the first time. The outcome has been a rapid rise in living standards and a reduction in poverty on a scale that is without precedent in human history. These changes have been most evident in China, with a historic transformation that began with the economic reforms of Deng Xiaoping and continues to this day. But the EME story is much broader than China.

The chart illustrates the best possible combinations of variation in inflation and output that can be 1 achieved in the economy. The three points on the chart refer to different forms of inflation targeting. It would probably be possible, with an aggressive use of instruments, to force inflation back to the target within a time-frame of only a few quarters. This is often called strict inflation targeting. Monetary policy has the most rapid effect through the exchange rate channel. Strict inflation targeting will therefore often involve a relatively substantial appreciation of the exchange rate so that inflation can be brought down through a fall in imported inflation. Monetary policy should not cause unreasonably wide fluctuations in the real economy. We therefore apply a two-year horizon to achieve the inflation target. In practice, we allow inflation to vary in the very short term. 1  I refer to a more detailed discussion in a lecture entitled “Monetary policy, cyclical fluctuations and competitiveness”, given by Deputy Governor Jarle Bergo at a conference hosted by the Norwegian Association of Economists in Oslo, 5 September 2002. BIS Review 2/2003  3  Another possibility would be to place weight solely on minimising variation in output or unemployment. This kind of policy does not improve the growth potential in the economy, but smooths fluctuations. Furthermore, this would generate very large variations in inflation as the economy would then be without a nominal anchor.