samchain/econo-pairs-v1 huggingface dataset:
At the present time Estonian banking sector is responsible for a significant share of the profits of their owners. Profitability means effectiveness at least comparable to the financial sectors of our neighbouring EU member countries and a somewhat greater flexibility of production factors, especially the flexibility of labour markets. Profitability also means a relatively rapid adoption of new technologies. For example, the number of card payments per capita in Estonia should be roughly equal to the respective German figures while the share of internet banking customers is somewhat higher (and the list of internet-based bank services somewhat more exhaustive) in Estonia. Estonia would like to be one of the first new members of the club - we would like to become a member of the euro area at the earliest possible moment. That would mean joining the ERM2 as soon as possible, with the present EUR/EEK exchange rate and the currency board arrangement in place. Provided nothing adverse happens, Estonia might be in a position to submit its application for ERM2 membership as early as mid-2004. It should, perhaps, also be mentioned that at the present moment, Estonia is in a relatively advantageous position among the candidate countries as to its ability to meet the Maastricht criteria and other important requirements.

We have drawn our plans and the work has been going on for some time. In some cases we can take advantage of our still-remembered experience of the 1992 monetary reform. In other cases, like some settlement-systems-related issues, we must wait for European institutions to make up their minds about the details. There is no doubt, however that technical preparation would not slow us down. IV. In conclusion  Speaking about future developments in Estonia in the light of the challenges shortly discussed above, it is good to bear in mind that policy efforts are necessary also after becoming part of the EU and the EMU. Fulfilling the Maastricht criteria and being 'admitted to the club' cannot be seen as 'the ultimate achievement'. For instance, the recent achievements of the economies of our Nordic neighbours compared to the developments in a wider Europe should make us very aware that there are real advantages in fulfilling the Stability and Growth Pact. I am convinced that EU membership will be beneficial to Estonia. But I am also very sure that Estonia has something to offer to the EU in its turn - some experience on handling issues pertaining to the  BIS Review 42/2003  3  flexibility and mobility of production factors, for example. It is important that Estonia, like every other future EU member state, offer its contribution towards the common goal. 4  BIS Review 42/2003
The challenge for central banks however, is to filter out noises from the mass of data and extract meaningful information that will assist in better policy-making. The Bank has embarked on a journey to adopt big data and analytics across all functions of the organisation. This includes establishing a dedicated statistics team to drive this agenda, enhancing the capabilities of staff and exploring new areas and methods of data collection. We continuously strategise to ‘future-proof’ the financial system through our policies, frameworks and initiatives. Three principles are worth mentioning; a. Firstly, we will continue to strongly advocate for the adoption of technology to enhance the efficiency, effectiveness and resiliency of the financial sector. Our FinTech sandbox and Financial Technology Enabler Group is an example of this. This also reflects our philosophy that innovations work best through collaboration between the industry and policymakers; b. Secondly, as a regulator and trustee of the financial sector, we will remain focused on ensuring that the financial sector is inclusive for all segments of society and contributes effectively and positively to the economic growth and development of the nation; and c. Thirdly, we will continue to ensure that financial stability and consumer trust and confidence are preserved at all times. Conclusion These are the cornerstones of the central bank’s role and functions and the adoption of any policies, past or future, will continue to have an unbreakable link to these objectives.

However, not all incumbent banks are able to fully bridge the technology gap, particularly for newer services; d. This results in migration towards digitally-focused challenger banks such as Atom, Fidor and Monzo that will provide similar services of traditional banks, but utilise technology to deliver faster and cheaper services that better meet the needs of customers; and e. The implication of this is that the landscape of finance will remain largely filed by banks, but a new breed of purely digital banks will gain in significance. The names that we immediately think of for financial services will change from the current banks that we are so familiar with. The fourth scenario is what I call ‘the Tech take-over’ a. Like scenario one, this is a more extreme and less probable scenario, but still one that is worth a thought. In this scenario, technology adoption by incumbent banks is low, with a high level of fragmentation among finance providers; b. However, in contrast to scenario three, technology firms enter as the new preferred provider, successfully capturing the loyalty of consumers due to superior ability in using data to deliver customer-centric solutions; c. Financial services will thus be offered via a wide range of providers such as social networks (e.g. Facebook, Wechat) and e-commerce platforms (e.g. Amazon, Alibaba); and d. Growing comfort with the ability of technology to ensure secured transactions also gives rise to the popularity of peer-to-peer financial services.
The answer lies in the current Bank of Thailand Act which does not spell out or lay down mechanism for the central bank to achieve its independence. Governor and Deputy Governor are political appointees. They are appointed by His Majesty the King upon the recommendation of the Minister of Finance and approved by the Cabinet. There is no definite term of office. There are no protective clauses in the Act which clearly spell out causes for removal. The most popular reason given by the government when firing governors was one of “suitability”. None of the nine governors had the chance to resign from the office in protest of the Government policies as advocated by Dr. Puey. In the past 7 years, we have 5 Governors including the present one who has been in office for just over 1 year. However, it is important to note as well that sometimes the relationship between Minister of Finance and Governor of a Central Bank turned sour not because of policy conflict but because of personality mismatch that led to eventual conflict. For instance, the current Minister of Finance and the present Governor work well together and have great respect for each other. What then is the solution? I think the best solution is to legalize Central Bank independence by spelling out clearly in the Central Bank legislation the power, duties, responsibility and accountability of a Central Bank.

The second issue is how independence should a Central Bank be? I believe that a Central Bank should be independent within the government because it is the Minister of Finance who has to be accountable to the parliament on issues relating to macro economic, fiscal, monetary and financial system matters. I agree absolutely with Governor Paul Acquah that monetary and fiscal policies must be harmonized in order to achieve macro stability, meaning that a Minister of Finance and a Governor of a Central Bank must work hand in hand to achieve a proper policy mix of fiscal and monetary policies so that sustainable growth can be achieved. BIS Review 53/2002  3  Ladies and gentlemen, I feel that I have taken enough of your time already. Therefore, I would like to conclude that a Central Bank can be considered as having its independence when it can perform its duty of achieving and maintaining price stability without any political or governmental interference, and with honesty and integrity while working hand in hand with the Ministry of Finance to achieve a balanced fiscal and monetary policies mix that lead to macro stability and sustainable growth. Inflation targeting approach is an effective mean to achieve Central Bank independence because it encompasses 4 very important ingredients: operational independence, responsibility, transparency and accountability. Other means can be just as effective if they have these 4 required ingredients.
As central banks, we need to consider carefully to what extent instant transparency with regard to liquidity operations may end up being counterproductive. Let me add here that this is a very complex issue. I am not arguing that the evolution towards greater transparency in central banking should be reversed. Indeed, perhaps we need greater ex ante transparency such as clearly stated conditions and eligibility criteria associated with central bank liquidity provisions. Undoubtedly, ex post transparency about potential liquidity support measures must also be guaranteed. But in the midst of a crisis, it may well be beneficial and desirable for central banks to have some flexibility with regard to how they communicate regarding potential liquidity operations. 2.2. Implications of volatile risk premia for the conduct of monetary policy  My second tentative lesson directly relates to the conduct of monetary policy. The recent market strains are unusual because confidence or rather the lack of confidence plays such an important role. Clearly, there is a great deal of uncertainty regarding valuations of complex credit instruments. Moreover and arguably more importantly, banks realize that they are facing or could face large contingent liabilities. They are therefore doing everything they can to protect their balance sheets. In essence, banks are hoarding liquidity and are reluctant to lend money in the interbank market beyond the very short term. As a result, a substantial and highly unusual risk premium has emerged in the interbank market.

In many ways, the situation is deteriorating. As we meet, it is unclear when and how we will be able to return to calmer financial waters. Today I want to begin by discussing why central banks care about financial stability. In a second part, I will try to draw some preliminary lessons for central banks from the current market dislocation. As I said at the outset, the credit crisis is unfortunately still unfolding and its future course is uncertain. Naturally, therefore, we face a lot of questions to which there  1  See for example P. Hartmann, S. Straetmans and C.G. de Vries, 2006, “Banking system stability: A crossAtlantic perspective,” in M. Carey and R.M. Stulz (eds), The Risks of Financial Institutions, The University of Chicago Press, Chicago. BIS Review 141/2007  1  are no clear answers. For the purpose of today’s discussion, I will confine my remarks to the following two issues: The first one addresses the question of the optimal degree of transparency with regard to central bank liquidity operations; the second one investigates the implications of unusually high risk premia in short-term interest rates for the conduct of monetary policy. 1. Why do we care about financial stability? Why does a central bank like the Swiss National Bank care about financial stability? After all, as is the case in a number of other countries, the Swiss central bank does not have a legal mandate to supervise and regulate banks.
There is some similarity with what the G20 has been aiming at with its “Framework for growth”, a process through which countries identify shared objectives, the policies needed to reach them, and the progress toward them … although we can obviously be more ambitious for the euro area. •  In a decision phase, the euro area Finance Minister would propose a strategy, consisting of the collective objective and – as far as necessary – its country specific translations in terms of reforms and policy stance. This proposal would be subject to formal opinions from the Fiscal and Competitiveness Councils. It would then have to be adopted at simple majority by the Eurogroup, and further to be endorsed by the European Parliament. In case of a stalemate, it would be for Heads of States and Governments – the European Council in a euro format – to adopt the collective strategy, on the basis of an adapted proposal by the EA Finance Minister. We should of course bear in mind the rationale for subsidiarity. Euro area outcomes will remain dependent on national policies. Many areas of policy-making and all implementation will remain decentralised. Yet full coordination will require that economic policy stance and spillovers be collectively agreed upon, and that Member states work consistently to achieve the common objectives. 6  BIS central bankers’ speeches  B. Which tasks for a euro area Finance Minister? First, the Minister would be in charge of preparing the euro area-wide collective strategy to fulfill the mandate I already described.

François Villeroy de Galhau: Europe at a crossroads – how to achieve efficient economic governance in the euro area? Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, recorded for the event at Bruegel, Brussels, 22 March 2016. *  *  *  Summary There is a growing perception of the need to rethink the economic governance of the euro area. Compelling ideas have been put forward to that effect; yet their implementation is tricky, especially in the present climate of Euroscepticism. Shifting from ideas to action has become urgent if monetary policy is not to remain the only game in town. Clearly, the single monetary policy cannot be a substitute for the coordination of national economic policies or the lack of reforms. To be sure, the debate over EMU reform is politically loaded; but for euro area citizens the poor coordination of national policies involves a high cost in terms of growth, of several points of GDP. The economic case therefore needs to be made: this discussion is not about “more Brussels”, it is about more growth and jobs in Europe. In addition, it is not a choice between domestic reforms or European coordination; we need both. Between complete integration – of the monetary-policy type – and monitored national policies, as currently conducted, the missing link is “full coordination” of fiscal and structural policies. This is clearly shown in a matrix crossing these three degrees of integration and the four policy dimensions (monetary, financial, fiscal and structural).
It may partly reflect very low levels of current policy rates and any spillovers from that.3 It may also reflect the term premia for inflation that are currently very compressed in some countries, for example, the US and in the Euro area. And it may also be a symptom of a more entrenched pessimism – an over-pessimism in my view – about long-term economic prospects, possibly due to fears of the de-integration of the global economy or concerns about future effectiveness of monetary policy. But, more fundamentally, the very low level of market interest rates reflects an underlying structural trend – the fall in long-run real interest rates since the early 1980s4 – that has been the subject of a great deal of research. The literature has identified a large number of candidate explanations – both real and financial – for a structural decline in the long-run real interest rate. These include: demographic trends and, in particular, increased longevity; lower trend productivity growth; the liberalization of financial intermediation and an increase in the risk borne by individuals and households.5  The long-run equilibrium real interest rates determined by these factors are, of course, unobservable. There is a range of estimates for how far they have fallen.

5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  In the banking sector, lower interest rates across the cycle reduce the net interest margins (NIMs) that banks earn from liquidity and maturity transformation. Moreover, NIMs would come under greater cyclical pressure more frequently and for longer because a proportion of banks’ liabilities pay no interest and cannot therefore come down to match a reduction in lending rates when the policy rate is cut.8  It is also possible that the yield curve will be flatter in a low for long environment as greater proximity to the zero lower bound of interest rates will mean less interest rate variability on average across the cycle leading to lower term premia. If so, this would further reduce banks’ earnings from maturity transformation. In Japan, a prolonged period of low interest rates has contributed to falling NIMs for over a decade. More recently, we’ve seen a similar – albeit smaller - effect in other advanced economies9. The impact of lower NIMs on bank profitability is currently reflected in lower price-to-book valuations of banks.10 Arguably, in ‘steady state’, once expectations of returns have adjusted downwards to a low for long environment, target returns on bank equity will adjust accordingly, though there is no evidence of this happening so far. We should expect, even if only for a transitional period if expectations of returns do adjust, greater pressure on banks to search for yield and move further out on the risk curve.
The corporate debt market has quadrupled since end-1996 with $ 103 billion of corporate debt securities outstanding as at end-2003. Debt issuance has increased substantially from only $ 5.4 billion at end-1996 to $ 67 billion in 2003, a compounded annual growth of 43%. The profile of debt issuers has also changed. Statutory boards used to dominate, but now form only 3% of total issuance. Instead, the debt market has a stable base of large corporates and financial institutions issuing bonds well over $ 1 billion in issue size. This has increased liquidity in the secondary market. Large international issuers such as IFC, Freddie Mac, Fannie Mae and ADB, which can tap any market in the world, have chosen to raise funds in Singapore. Treasury markets have also stayed buoyant, as Singapore remains one of the established leading global FX trading centres. The creation and hedging of structured products have boosted turnover in derivative markets. Singapore now ranks 6th globally, in OTC FX and interest rate derivatives. Reforms were also introduced to deregulate the stockbroking industry. The industry has consolidated, operating more leanly on much lower commissions. The bigger local players have expanded their product range and also expanded overseas. More foreign players have entered the market. Overall, investors have benefited from lower trading costs. SGX became the first demutualised, integrated stock and derivatives exchange in the Asia-Pacific in December 1999. It is now well placed to grow its business, and respond to developments in regional capital markets.

The same applies to the return on GPFG capital. The three paths illustrate the uncertainty we are facing, but they also illustrate another important point. Spending the return will ultimately lead to a flattening of the GPFG, which will then decline as a percentage of GDP. It has always been clear that this will happen at some point in the  8  BIS central bankers’ speeches  future. What is new is that this may be the case here and now. At today’s oil price, the GPFG may have reached the peak. In that case, petroleum revenue spending as a percentage of GDP must be reduced to avoid using more than the return on the GPFG. Even if the oil price and the rate of return follow a path that allows the GPFG to grow for a period ahead, petroleum revenue spending should be restrained. By keeping spending well below the upper bound, the need for fiscal retrenchment further ahead can be reduced. The fiscal rule has functioned as a long-term guideline for fiscal policy for nearly 15 years. It has served its purpose. The time has now come to show restraint. A sensible risk adjustment is now to refrain from increasing petroleum revenue spending further from today’s level. The era of rising petroleum revenue spending may be behind us. Conclusion The more than forty-year-old white paper on the role of the petroleum industry in Norwegian society was far-sighted and proved to be on the mark.
Can this persist in the long term? The ECB’s monetary policy will remain very accommodative until inflation is firmly on a path towards 2%. What other reasons are there, beyond the ECB’s decisions, for interest rates being so low? It is because growth is still weak. It is because our economies are less able than in the past to create growth. The ECB must take account of this environment and, to provide effective support to the recovery, we must set our key interest rates at very low or even negative levels. If the European economy regains the ability to sustainably create growth, interest rates will return to levels more favourable to savings. How do you account for the fact that economic growth has remained low in France in 2016? The pace of economic growth is accelerating throughout the euro area and the unemployment rate is falling, including in France, but at a slightly slower pace. The ECB’s monetary policy has made a strong contribution and the reforms implemented in each country have played a role. The countries that were severely affected by the financial crisis have had to undertake reforms. The reforms that they have implemented, particularly in the labour market, have been hard but are now bearing fruit. In Spain, for example, growth is set to be above 3% in 2016 and the unemployment rate is falling rapidly. France, which weathered the crisis better, faced less pressure to undertake reforms. Today growth in France is weaker and unemployment is higher.

This illustrates the importance of further reforms. 1/1  BIS central bankers' speeches