samchain/econo-pairs-v1 huggingface dataset:
The important aspect of developing this work is in providing a common vocabulary in which policymakers can discuss the possible impact of a problem. This may also help to provide a framework for deciding whether to intervene in a crisis, as well as helping to understand who may be interested in intervening. BIS Review 112/2006  3  And fourth: the types of measures we have available in a crisis. I outlined earlier a number of challenges in resolving a crisis involving a large complex financial institution, and the obstacles we may face in addressing them. The Contact Group 2002 report on legal underpinnings 4 provided more detail on the extent to which different legal regimes created vulnerabilities in managing crises. Through discussion of hypothetical problems for real firms we may get closer to understanding more concretely what these obstacles will look like in practice and therefore what we might want to put in place to mitigate them. Put another way, it is potentially a way to develop practical solutions, or at least a practical understanding of the specific issues we might face, within the parameters of our current legal and fiscal set up. What we learn from firm-focussed interest groups should also put us in a better position to tackle some of the thorny issues we face.

And there have been a number of exercises and co-ordination initiatives in different regional groups (for example amongst the Nordic countries, Dutch and Belgian authorities, and more widely across the EU). But there has been less progress on the wider international front. Overall, I do not know anyone who believes that we have established either the common approach to crises or the practical machinery which would enable us to handle a complex cross-border failure with confidence. I would like to make some suggestions tonight on how we might take matters forward. When and how should the State intervene to prevent or manage a financial crisis? Of course the underlying questions are very difficult even for one country. Financial markets are often volatile and they can only work well if investors and firms expect to live or die by their own decisions and do not come to rely on a safety net to mitigate their losses. To avoid that ‘moral hazard’, authorities have tended to be reluctant to spell out in what circumstances and what ways they would  1  Gerard Caprio and Daniela Klingebiel, 2003. “Episodes of Systemic and Borderline Financial Crises”, World Bank Research Dataset. http://econ.worldbank.org  2  http://www.fsforum.org/home/home.html  BIS Review 112/2006  1  be willing to help support a market or a participant, beyond making clear that it would only be in exceptional circumstances and where it was essential in the wider systemic interest.
As the ability to generate great ideas in the CEE region is limited, it seems that in the transition period the most important modernization channel in the region was through foreign direct investments. Indeed CEE became a very large recipient of FDI, with FDI stock to GDP ratio topping 40 percent in CEE-4 region. Only NIEs economies managed to attract higher FDI stock in relation to GDP and enjoy higher FDI annual inflows. 2  BIS Review 138/2007  However, in the global knowledge economy it is important to attract foreign direct investments to sectors that can become globally competitive, in particular to these sectors that export high-technology, i.e. high value added goods or services. While CEE-4 significantly improved the structure of exports, the high-tech goods account for only 12 percent of manufactured exports, which is the world worst result, lagging even behind Latin American countries. NIEs are world leaders and China is about to take over the second post from the United States. Above data suggests that in the long run low ability to generate innovation combined with low value added FDI may harm the CEE ability to improve productivity. On top of above-mentioned factors I should also add that in the last few years we have witnessed very fast growth rates of asset prices in CEE. The amount of loans granted to households increased 3.5 times since 2004 and almost 10 times since 2000.

The crucial factor to succeed in the global knowledge economy is the country’s ability to develop intellectual capital. Only those who understand the importance of innovations for growth will thrive and prosper in the coming decades. Unfortunately, CEE region lags badly behind the leaders in terms of its current and future ability to generate innovation. One of indicators measuring current ability to innovate is the number of researchers. In the mid-1990s CEE-4 (the Czech Republic, Hungary, Poland and Slovakia) and Asian NIEs had similar number of researchers per million people, while two years ago NIEs had almost twice as many persons employed in R&D per million people in comparison with CEE-4. Future knowledge potential of particular country or region can be measured by tertiary enrolment ratio. Tertiary enrolment ratio in the CEE-4 countries improved to 50 percent in 2004, but still remains well below 62 percent in the EU-15 and 82 percent in the United States.. Because of a relatively small population and a number of structural deficiencies it is very unlikely, that increase in the number of students in CEE-4 that have occurred in recent decade will translate into higher innovation potential in the coming years, unless a dramatic change in policies in CEE-4 is made. This is also confirmed by a dramatically low number of patents registered in the CEE countries and extremely low number of scientific publications.
External asset managers are used to benchmark internal portfolio management and obtain more efficient access to certain asset classes. The SNB was also among the first central banks to adopt a structured approach to managing non-financial aspects, such as ESG risks. How does the SNB factor ESG risks into its balance sheet management? I would like to start with our bond portfolio, which accounts for 80% of our foreign exchange reserves. Most of this portfolio is made up of government bonds. Other bonds, such as corporate bonds, represent 12% of our reserves. Our bond portfolio is actively managed in terms of country selection and weighting. In other words, while we use a combination of broad bond indices, we deviate from these – within pre-set limits – in order to generate a higher return. Our portfolio managers use all the information at their disposal to guide their investment decisions. This comprehensive assessment essentially includes all types of financial risk that may arise in one form or another. Factoring climate risks into risk assessment is therefore an integral part of good portfolio management. In this context, it is worth mentioning that, for some years now, the SNB’s bond portfolio has included green bonds. As their name suggests, these are bonds whose proceeds are used to finance environmental projects. What about our equity portfolio? In our equity investments, we pursue a passive and neutral approach (index-linked management).

Given our country’s climate risk profile and the fact that the bulk of these risks is insured, a climate-related natural disaster is unlikely to threaten the stability of the entire banking system in Switzerland, even if some individual institutions could be affected. 6  According to the National Centre for Climate Services (2018), the number of days with snowfall at altitudes below 800 metres has halved since 1970. For a simulation of the implications of the various modalities for introducing a carbon tax on the Swiss economy, see Marcucci, A. and L. Zhang (2019), ‘Growth impacts of Swiss steering-based climate policies’, Swiss Journal of Economics and Statistics 155(9), pp. 1–13. Page 4/12  Let’s now move on to the second category of climate change risks, transition risks. These include the economic costs and benefits resulting from adjustments to regulations and government policies aimed at decarbonising the economy. Examples are the scrapping of polluting production processes, the growth of investment into researching and developing green technologies, and an unanticipated adoption of new taxes or subsidies. As with any other tax, the introduction of a carbon tax could change the sectoral composition of domestic production in a way that is significant but hard to quantify. That being said, transition risks are above all likely to impact the financial system – through the revaluation of assets. A sudden shift in climate and energy policy could reduce the value of assets in the sectors most affected by the new regulations (e.g. commodities, automotive, heavy industry).
In simple terms, inflation may be defined as the change in the general price level of goods and services. However, in every day usage, inflation may be defined as “too much money chasing too few goods”. Describing inflation this way makes it easier to link it to monetary policy which is the control of money supply in an economy. The Bank of Zambia is concerned that inflation has remained stubbornly high for quite sometime now. As at end-June 2005, inflation was at 19.2% which we consider too high to foster sustainable economic growth. The poor weather patterns over the last agricultural season resulted in low crop output, particularly that of maize, which induced inflationary pressures. The unyielding rise in world oil prices on account of high demand from China and India, due to high economic activity, disruptions in supply, arising from war in the Middle East, as well as processing capacity constraints in many oil consuming countries have also caused a general rise in the domestic prices of petroleum products thereby increasing the cost of domestic production. In order to moderate the inflationary pressures arising from low crop output, on a sustainable basis, efforts should be directed at diversifying and improving agricultural output away from rain-fed agricultural practices. Government’s commitment to increased investment in the agricultural sector is therefore commendable as this should assist in improving the supply of agricultural output, in particular that of food items. This has an important bearing towards reducing consumer food inflation.

Caleb M Fundanga: Improving school infrastructure in Zambia Remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the Handover Ceremony of computers to Mumbwa High School, Mumbwa, 4 February 2010. *  *  *  The Board Chairperson, Mr Gracious Hamatala Board Members Present The PTA Chairperson, Mr Mwila Kabange The Headmaster, Mr Kizito Kalonga Distinguished Teachers Students Members of the Press Ladies and Gentlemen It is an honour and privilege for me to be with you today as the Bank of Zambia makes this humble donation of 5 computers to Mumbwa High School. I am also glad because in some small way we are making a contribution towards ensuring a brighter future for the students. Chairpersons, I am informed about the numerous challenges and difficulties, the school continues to face in its quest to produce high quality education to students. For instance, I am aware that there is a critical low level of books compared to the population of students in the school. Further, having been established 40 years ago, the School’s infrastructure urgently needs to be rehabilitated. The refurbishment of infrastructure is not an easy task but in the able leadership of the Board Chairperson, I have no doubt that a solution will be found in good time. As we grapple with the ways and means of improving the school infrastructure, let me reiterate that the school need to maintain and protect the little infrastructure available.
Singapore does rank well in the FinTech stakes, but I have to tell you that it’s a distraction at this stage and it really doesn’t get to the heart of what we are doing. Our aim is not to see if we can be above other financial centres, but to push the envelope and transform finance: to encourage players to find new ways of doing the business, and in a way that makes more sense to the customer – the borrower, the lender, the middle-class investor, or someone who makes payments or receives them. Transforming finance to be more tailored to their needs, something that’s if possible cheaper, or more convenient and accessible to the customer. That’s our aim. But we are at an early stage in FinTech. We are at the cusp of the new wave of innovation. There’s no assurance that it will succeed, and no telling who will succeed. But it shows much promise –promise of delivering better value to the customer. There’s a second reason why the rankings are really not the end game, and that’s because FinTech probably more so than conventional finance is going to involve tie-ups and collaborations – between players and between cities, at the same time that it’s an extremely competitive business. The Asia-Pacific has tremendous untapped potential in finance. There is a very significant underserved market in the Asia Pacific, in Southeast Asia, in China, in India.

2  BIS central bankers’ speeches  Most FinTech ventures, globally, have indeed not succeeded to date. The real stress test of any new idea in finance is the economic and credit cycle. But even where new players fail, they usually leave behind an idea – an idea to be modified, taken over or improved. We must allow for this experimentation, but we must do it in a way that preserves trust and credibility in our financial system. That is foremost in our minds. So regulators are watching this carefully. We have to allow for innovation. But any player that acquires a meaningful scale in finance should expect to be regulated like any other financial institution in their business. There must be a level playing field, and there are to begin with good reasons for why regulations exist. We cannot stifle innovation. We must let people come up with new ideas, and let them run with it. But once they acquire meaningful scale in the financial sector, they should expect regulation. Ten years from now, finance will be very different. We can’t say exactly how. But we in Singapore intend to be a key player in innovation in finance. A key player in advancing ways to help consumers with their needs as lenders, borrowers, as makers of payments. In Singapore and the Asia-Pacific. We will go about this very energetically in Singapore, especially in developing common infrastructure or utilities, as I just mentioned. Ravi will be going through some of our strategies.
This is a little unsettling, because during the last 20 years we have been successful in establishing as a better practice the approval of the compliance program by the board of directors. One might think that, if the board of directors approves the compliance program, then it should not be difficult for the chief ethics and compliance officer to get the business owners to pay close attention. The devil here, as in so many other places, lies in the details. It is usually the implementation of the compliance program that causes the conflict. It is usually related to the cost of compliance, because the cost ordinarily affects how the business owner measures success, which is the size of the business’ profit. The chief ethics and compliance officer will not be able to resolve the conflict easily, because compliance is a cost to the business which can make compliance the adversary of the business owner. The chief ethics and compliance officer will not want to bring a specific conflict issue to the attention of the board of directors. While this might be very effective in resolving the specific conflict, it could absolutely destroy her ability to function effectively thereafter. In a recent survey of chief ethics and compliance officers conducted by Price Waterhouse, the survey respondents identified as a problem their “struggle to gain the attention of the board of directors.”6 Two specific issues were identified.

However, it is possible to look at compliance in a very different way, as a two-way street and not a “one-way” street. Let me explain what I mean. A sound and effective compliance program can be used, appropriately in my view, as a tool that would permit on-boarding of what is seen as risky business. To continue with the example of correspondent banking, if a U.S. correspondent had a sound and effective compliance program that was well tailored to identify and control the risks of money laundering, terrorist financing, and sanctions evasion, this correspondent might become sufficiently confident to on-board risk. This means that instead of closing accounts for everyone in a specific geographic area, it would continue with some of these accounts, or even open new accounts. Now, I do not want anyone to think I am saying that all correspondents can reasonably have such confidence now. At this point in our journey, I concede the need to develop greater confidence that the identified risks can be controlled at a reasonable cost. With that said, I believe that we will reach a place where ethics and compliance programs are sufficiently developed so organizations can make considered decisions to on-board risk and keep it within the accepted risk appetite by using effective controls. I look forward to that time as we move to the next level. 3.
2  BIS Review 111/2006  First, the earlier strict regulations on lending meant that banks did not really acquire the skills to evaluate the creditworthiness of customers and loan projects – only those with very high creditworthiness had had access to the limited amounts available for bank lending to non-prioritised purposes. The restrictions on lending to other purposes led to a large unsatisfied demand from potential borrowers. After deregulation, bank lending increased extremely rapidly without banks’ credit managers really having much experience on how to evaluate borrowers’ creditworthiness. A similar weakness applied to the supervisory authority – they had supervisors with good skills to check the banks’ formal compliance with laws and regulations but not to evaluate credit decisions. At the outset, the central bank took the erroneous view that the loan expansion in the banks could to a large degree be explained by old loans moving out of the former “grey sector” and into the banks. Since this had different implications than an extension of new loans, the central bank found that there was no need for the authorities to worry. Second, a large share of bank lending went into the real estate and commercial property business. There was a building boom in Sweden during the 1980s and prices rose rapidly – paving the way for additional lending. When real estate prices collapsed in the early 1990s the value of the collateral for many bank loans fell sharply and banks suffered huge credit losses from non-payments.

Such events might mean that the bank would have to suffer a loss although it thought it had protected itself. The conclusion is that the authorities must force the banks to assess whether the risk buyers have adequate financial and organisational capabilities and whether the legal arrangements are robust. As in many other countries, there is a strong tendency in the Swedish financial sector to move from “bricks and mortar”, such as having many branch offices, to providing their services through the Internet and telephone. About half of all payments of companies and physical persons in Sweden are made through the Internet and by phone. This has made it possible to increase bank efficiency in  6  BIS Review 111/2006  terms of staff numbers and branches. Each Swedish bank branch now services an average of 4,700 persons in the population compared to, for instance, only 1,900 being serviced by the German banks’ branches in Germany. Of course, each country is free to choose its own service level and may prefer a higher level, although it brings higher costs. Modern regulation In my view, Sweden abolished its old-fashioned regulations for good reasons. Using the banks for directed lending and for other non-commercial purposes may seem handy for the government, but entails large risks and costs.
To preserve this advantage, Norway needs to be a leader. Technological developments pave the way for new possibilities – new means of payment are introduced and existing means of payment become faster and cheaper. While most changes result in a more efficient system, they also pose new challenges. New technology and outsourcing require stricter standards for both the risk management framework and contingency preparedness. Responsibility rests with system owners. As supervisory and oversight authority, Norges Bank has a duty to point out any deficiencies and weaknesses. There are also challenges associated with the pricing of payment services. When given a choice of payment solution, customers are not charged prices that reflect actual costs. Does this make the system more expensive than necessary? Banks operate most of their payment solutions at a loss. Does this have to be? Are banks’ incentives to invest in secure and forward-looking solutions being weakened? Risk and costs are drivers of change The main structure of the payment system has remained fixed for a number of years, but there have been changes, both to the part of the system customers encounter and to interbank settlement. Behind many of the changes is a desire to reduce risk or costs, often both. 2  1  See the Payment Systems Act. 2  The discussion of trade-offs between costs and risk is inspired by Kahn et al.

The result can be that an inexpensive solution – BankAxept – is supplanted in favour of more expensive solutions. In Denmark, merchants charge a fee to customers who use a credit card. A similar practice in Norway could keep down payment costs. The profit banks earn on the use of international payment cards is higher than on BankAxept. It is therefore likely that, in isolation, it is in the interest of many banks for customers to choose international payment cards. New European regulations that will set a cap on the fees issuers of payment cards can charge are in the pipeline. This will likely weaken banks’ incentive to promote international payment cards. Banks continue to lose money on payment services. The cost survey we are presenting today does show that banks’ cost coverage has increased somewhat over time. But income still amounts to only 76 percent of the costs associated with payment services. Banks lose money on all main types of payment instruments, except for international cards. The losses must be covered by income from other banking activities. Pricing that does not cover costs may be a conscious choice by banks. Some customers may believe that they should not have to pay for using their own money. At the same time, mispricing and losses weaken banks’ ability and willingness to promote efficient solutions and invest in new infrastructure. That is not a forward-looking approach. We must invest now to ensure efficient and secure payments also in the future.