samchain/econo-pairs-v1 huggingface dataset:
Pigovian taxes are common within the area of environmental regulation, where they can, for example, take the form of fuel taxes in order to put a price on the negative environmental effects of traffic. In the same manner as these taxes attempt to put a price on the environment, it is possible to imagine using a Pigovian tax, based, for example, on the banks’ lending, to price – or internalise – negative external effects associated with banking. As the banks would pass at least a portion of such a tax on to their customers, the effect of this tax on the borrowing rate would be equivalent to an increase of the interest rate margin. Sweden recently introduced a stability charge to be paid by the banks. This charge is intended to finance a stability fund to act as a central government financial buffer for the costs that may arise in a financial crisis. At present, the stability charge is not riskdifferentiated. A charge that is risk-differentiated in an appropriate manner to provide the banks with the incentive to redistribute their activities depending on risk could be seen as a type of Pigovian tax. It could also be imagined that Pigovian taxes could be used to attempt to correct the crossborder external effects that may arise in an increasingly integrated European banking market. One example is the Swedish banks’ lending activities in the Baltic which have probably entailed a liquidity risk in foreign currency in Sweden.

However, with a rule of action, the application of regulations itself becomes a function of a number of variables that vary over time:  itlending  it   t ( z ( z , lt , yt ,...)) . Various institutional arrangements can be imagined, based on the distribution of responsibility for assessing the variables in the function, determining rules of action or functional form and, finally, for translating the function into actual regulations. The latter would probably require an element of discretionary decision-making. One possibility would be for the central bank to determine the policy rate ( it ) and for the supervisory authority to determine regulations, that is to say both z and z (...) , as is the case in Sweden. Another possibility would be for the central bank not only to determine the policy rate, but also to determine the time-varying regulations through taking responsibility for the application of the rule of action ( z (...) ), while the actual implementation of the non-time variable regulations ( z ) would be the responsibility of the supervisory authority. A variation of this would be for the central bank to be completely responsible for the implementation of the time-varying regulations. Finally, there is the possibility of the central bank taking responsibility for all regulation and supervision. At present, it is still too early to say whether the international debate will conclude that one form of organisation is better than any other.
Following the above forum, the first round of one-on-one meetings were held between 17 and 23 January 2014, with the Boards of Directors and senior management of banks and NBFIs, chaired by the Governor, to discuss their business plans under the newly announced plan and further clarify specific issues pertaining to particular institutions. Action 2: Communicating the mandate and time frame In line with the objectives of the financial sector consolidation programme, we provided the banks and NBFIs with a mandate to form internal steering committees to ensure a strategic fit by choosing a suitable partner and to ensure smooth transition to the new arrangement so that the process would ultimately generate synergies in the industry. Further, the relevant banks and NBFIs were requested to align their immediate future business expansion, new recruitments and other capital expenditure with the new developments and to submit periodic progress reports to the Consolidation Unit. We also requested the banks and NBFIs to formulate strategies to work in line with the time frame suggested by the Central Bank, which basically requires all consolidation plans to be submitted by 30 June and completed by end of 2014. Although this time frame was subject to criticism by some, we simply know by practice that unless we have a reasonable deadline, no plan would be effective. However, we maintained some flexibility in the time frame for the completion of mergers and acquisitions that are of a complex nature.

Banks in Sri Lanka have been in operation for over 160 years while the NBFI sector has been a part of the economy for the last 80 years. Before the economic liberalisation in 1977, NBFIs carried out hire purchase and leasing business using their own funds or personally borrowed funds. Since the owners of such companies prudently managed their businesses and were cautious in lending, NBFI failures during pre-1977 era were extremely limited. The new economic policies in the post-liberalisation period gave rise to higher demand for credit from the private sector, which led the NBFIs to raise public deposits. However, lack of controls and regulations during that period limited the ability of the Authorities to move directly into the affairs of NBFIs. With the commencement of operations of the Central Bank of Sri Lanka in 1950, the Bank Supervision Department was set up, and has since been entrusted with the responsibility of supervision and examination of banking institutions. The scope of functions of the Bank Supervision Department was extended with the enactment of the Control of Finance Companies Act, No.27 of 1979, to include the supervision of NBFIs. The Bank Supervision Department was entrusted with the responsibility of providing the public with the required confidence in the financial system and protecting the interests of depositors. In order to achieve this objective, the Department was charged with the duty of continuous supervision and periodic examination of all banks and NBFIs in Sri Lanka.
Over the years, the DFIs in Malaysia have evolved in tandem with the country's economic transformation, especially to support developments in the strategic and new growth areas such as high technology, infrastructure, SME development and micro finance. Bank Pembangunan was entrusted by the Government to support infrastructure development in expediting economic recovery following the financial crisis in 1997. Likewise, in line with the strategy to promote capital-intensive and high technology industries, Bank Industri was entrusted with the task of supporting advanced industrial development, such as engineering activities and computer software development. In the Malaysian financial system, the banking institutions form the largest component of the financial system, constituting about 51% and 78%, respectively, of the total assets and loans of the financial system. In contrast , the total assets and loans of DFIs as a group, respectively accounts for about 5% of the financial system. Nevertheless, these DFIs have been instrumental in providing the complementary financial services needed to support development of the targeted sectors and activities. One particular notable development is the support provided by the DFIs for SMEs. Like many other economies, in Malaysia, the SMEs form the backbone of the economy with high potential in fostering the forward and backward linkages of activities along the value chain. While SMEs constitute about 90% of total establishments in the manufacturing sector, at the  3/5  moment they only provide about 30% of employment in the sector and contribute about 6% to Malaysia's GDP.

Datuk Zamani Abdul Ghani: Role of development financial institutions in the financial system Speech by Datuk Zamani Abdul Ghani, Deputy Governor of the Central Bank of Malaysia, at the International CEO Forum of the Development Finance Institutions 2005, Kuala Lumpur, 12 September 2005. *  *  *  I would like first of all to express my sincere appreciation to the Association of Development Finance Institutions of Malaysia for inviting me to say a few words this morning on "The Role of Development Financial Institutions (or DFIs) in the Financial System". It is indeed an honour to address such a distinguished gathering of CEOs and senior officials of DFIs from many parts of the world. Before going further into the subject at hand, allow me to congratulate the organisers for jointly putting up this international forum. This forum provides a platform for CEOs and senior officials to exchange views and ideas on SME development and just as important, the roles of DFIs in this endeavour. I would also like to specifically welcome the foreign participants to Malaysia and wish that you will have a pleasant and enjoyable stay in Kuala Lumpur. My remarks this morning will consist of three parts. The first provides an overall perspective on the universal establishment of DFIs in many parts of the world; the second will look at the prospects and some of the challenges for DFIs in carrying out their roles; and the final part will provide an insight into the roles of DFIs from the Malaysian perspective.
In a 2009 report on the crisis, the OECD observed that “corporate governance routines did not serve their purpose to safeguard against excessive risk taking”. A crucial shortcoming in many cases was the corporate culture within financial institutions. It is therefore no surprise that “weaknesses in risk culture are often considered a root cause of the global financial crisis”. We all know too well how loans were systematically sold to people who were clearly unable to repay. Lenders operated on a legal, but ethically questionable, originate-to-distribute business model – this saw the risks associated with sub-prime mortgages being repackaged and sold off to unsuspecting third parties. Another sobering example of the link between culture and crisis comes from a finding of the Financial Crisis Inquiry Commission in the United States on Lehman Brothers. The Chief Risk Officer was stripped of her role after raising red flags on risks, in the face of intense competition from other investment banks. As we all know, the bank went on taking much more risk that it could reasonably manage – and the rest, is history. While the global financial crisis has inspired much conversation about ethics and culture, these issues are by no means new. Throughout the 2000s, an estimated 45 million payment protection insurance (PPI) policies worth around £ billion were widely mis-sold to customers in the UK. Many people did not even know that they were buying a PPI policy.

These rules emphasise sensible governance structures – such as preventing control function officers from having their bonuses determined by the profits of business units they oversee. They also require risk-adjustments in quantifying bonuses – for instance, two traders who bring in the same profits, but expose the firm to different levels of risk, are rewarded differently. The other area that is important to fostering a healthy culture at the situation-level is “speaking up”. It is important that there are clear and robust whistleblowing arrangements for employees to raise legitimate concerns about illegal or unethical practices. In addition to the statutory protection offered for whistleblowing to authorities, it is also important that financial firms have internal arrangements for concerns to be raised within the organisation. However, whistleblowing only makes up a small portion of a speaking up culture. In fact, it is a last resort which will not need to be used in an organisation with a healthy culture of open discussion. For professionalism and integrity to prevail – it is crucial that financial firms encourage constructive challenge and healthy debate. This is particularly pertinent for the more ambiguous issues of ethics, professionalism and integrity. (c) Person We have discussed the elements of “system” and “situation”. The third element that is critical for a healthy culture is that of the “people”. I pointed out earlier that the evidence of psychology suggests that the “system” and “situation” are far more likely to predict actual ethical behaviour compared to personal convictions.
th  Chart 6: Real wage growth slowest since mid-19 Century 10-year moving average, per cent 4  3  2  1  0 Forecast -1 1850  1865  1880  1895  1910  1925  1940  1955  1970  1985  2000  2015  Source: Thomas, R. and Dimsdale, N. (2016) "Three Centuries of Data - Version 2.3", Bank of England, based on average weekly wages and the CPI; and November Inflation Report. Such high income inequalities are dwarfed by staggering wealth inequalities. The proportion of the wealth v  held by the richest 1% of Americans increased from 25% in 1990 to 40% in 2012. Globally, the share of wealth held by the richest 1% in the world rose from one-third in 2000 to one-half in 2010.  vi  The picture in the UK is complex but in general suggests relatively stable but high levels of overall inequality, with sharper disparities emerging in recent times for the top 1%. When combined with low growth of incomes and entrenched intergenerational inequity, it is no wonder that many question their prospects. 5  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  5  For example, a common measure of the distribution of income, the Gini coefficient, shows that inequality rose sharply during the 1980s and has more or less plateaued ever since (Chart 7). That suggests a large structural shift during the Thatcher era, followed by a more modest series of adjustments thereafter.

Thank you for your attention and I wish you a successful work in the forthcoming period. BIS Review 127/2009  7
This is mainly because it is sometimes claimed in the general debate that the Riksbank and other inflationtargeting countries have bound themselves too tightly to a particular model and that a more “pragmatic” policy system would give better results. My conclusion is that our method of working is  BIS Review 11/2005  7  sufficiently flexible to manage the necessary balance. As I see it, there are major advantages to a system like ours, with a clear target, publication of the background data, a policy rule, etc. It provides our activities with stability, both at the staff level and in the Executive Board’s discussions and communications. We are also forced to systematically examine all new ideas and issues that arise against the framework we apply, which has proved an intellectually fruitful exercise. However, what I have tried to show here is that the methods we now use can sometimes enable us to produce more interesting data for monetary policy and to describe our considerations in a more pedagogical manner. They can make it easier to demonstrate the flexibility of the inflation-targeting regime we work with. Whether this will then have an impact on the monetary policy debate in Sweden, and ultimately on the policy conducted, is a very difficult question that only the future can answer.

Before a monetary policy decision the Bank makes clear whether it expects inflation to deviate from the target or not, given the current interest rate level. If the forecast is above or below target it shows clearly that there is reason to consider whether the repo rate needs to be changed. The framework applied by the Riksbank has been the established practice in inflation-targeting countries. But as early as the mid-1990s the Reserve Bank of New Zealand, for example, opted for a  2  The volatility, measured as the standard deviation of GDP growth, was 1.9 percentage points during the period 1970-1992. Since 1995 the corresponding standard deviation has been 1.3 percentage points. 3  See Andersson, M., Dillén, H. and Sellin, P., ”The yield curve and the Riksbank’s signalling”, Sveriges Riksbank Economic Review 3, 2002, 5-19. BIS Review 11/2005  3  different method, publishing forecasts based on the interest rate path that they thought gave the best target fulfilment. Our academic advisers have also repeatedly said that we should prepare forecasts based either on how the market expects interest rates to evolve or that we, as in New Zealand, should work out what interest rate path is consistent with reaching the inflation target.4 Against this background we at the Riksbank have of course discussed over the years the question of what importance we should attach to different interest rate assumptions in our internal work and when we publish forecasts.
This is less true for emerging markets, including Brazil, where central banks tended to keep a strong focus on financial stability even before the global financial crisis. In part, this reflects the fact that financial crises were relatively more common in emerging markets in the late 20th century. There was also an old and important academic and monetary policy debate in the decade leading up to the crisis on whether we should lean against a financial bubble or clean up after it has burst. However, the lack of consensus on this issue resulted, in practice, in a mostly laissez-faire policy stance. BIS central bankers’ speeches  1  Today, I think it is safe to say that there is general agreement that proactively maintaining financial stability, by taking appropriate action against the buildup of vulnerabilities, is a proper goal for central banks. The high cost of “cleaning up” after the global financial crisis will serve as a reminder against excessive complacency for some time to come. The current debate is about the policy tools for the goal of maintaining financial stability. Macroprudential policy is widely seen as the first line of defense against systemic risk, but there is still uncertainty about its effectiveness. There is also disagreement on whether monetary policy should take financial stability considerations into account at all. On this latter issue – the use of monetary policy to deflate potential financial bubbles – there are two views.

Since monetary policy primarily affects the economy through long-term real interest rates, and therefore through agents’ expectations for the future paths of the policy rate and of inflation, the end result would be more accommodative policy during the downturn than recommended under the IT regime. 2  BIS central bankers’ speeches  A more modest proposal was to keep the IT regime, but increase the targeted level of inflation. The crisis and the bubbly period that preceded it convinced many that the modern macroeconomy is more prone to shocks that previously believed, and therefore the 2% target level that prevailed in mature economies before the crisis was perhaps too low to keep the economy from repeatedly hitting the zero lower bound. My take on this debate is that, at the end of the day, inflation targeting emerged even stronger from the crisis. No major central banks abandoned inflation targeting, and some central banks that were not inflation-targeters adopted elements of the framework. There are several reasons for the resilience of the IT regime: •  Central banks found that inflation targets were actually helpful in explaining the need and the room for unconventional policy measures to the general public. •  Furthermore, inflation targets helped anchor inflation expectations, keeping deflation at bay despite the large output gaps prevalent at the height of the crisis. •  The proposed new monetary policy regimes suffer from a number of practical deficiencies. They are too complex for the general public to understand and follow.
This picture has been confirmed by the latest National Accounts data and was underlined as early as in our December assessment. Since then it has become clearer, and the somewhat better productivity was an important argument for the rate cut in February. It is likely that the more robust productivity has partly been due to the developments in economic activity; at the beginning of a recovery, existing production resources are utilised more efficiently and only when the revival has been established will a rise in investment and new jobs begin in earnest. But this explanation is not enough since productivity appears to have risen more than normal given the economic situation. This pattern is very clear in the US but is also somewhat discernible in Sweden. One possible interpretation is that it is due to unusually large-scale investment in, for instance, IT at the end of the 1990s. It is also conceivable that it reflects more permanent changes that could be related, for example, to technological advances in IT and telecommunications. At present, it is not possible to determine exactly what has caused the improvement in productivity. However, when we look ahead to the coming years, we see reason to expect a better productivity outlook than that we had in December. The new inflation data that have been received also point to somewhat more subdued inflationary pressure.

The reason we focus on inflation 1-2 years ahead is because monetary policy affects the economy and inflation with a certain time lag. This approach has served us well over the decade during which we have conducted monetary policy with an inflation target. Since the target was adopted, inflation has by and large averaged 2 per cent. At the same time, we have experienced better general economic progress than during the two preceding decades. The clear target coupled with our mode of action has also helped to make the Riksbank’s policy accessible to both the public and the financial markets. Inflation expectations have been anchored fairly stably around our target and it has been possible to predict our actions rather well. Nevertheless, there is cause to underline that we do not run on autopilot and mechanically change the repo rate in relation to our inflation forecasts. There may be reasons for us to wait before taking a decision in order to be able to perform more in-depth analysis or obtain more information. There may also be reason to take into account additional aspects in our decision rather than just inflation 1-2 years ahead. Such aspects could include how the economy in general would be affected, inflation in both a longer- and shorter-term perspective and the impact on financial stability. But it is important to have a framework that is as explicit as possible, with clearly defined and stated objectives. In this way, everyone can follow our line of reasoning, question it and comment on it.