samchain/econo-pairs-v1 huggingface dataset:
Caleb M Fundanga: Financial market progress in Zambia Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official launch of the Equity Capital Resources Unit Trust, Lusaka, 21 April 2008. *  *  *  Chairperson Distinguished Ladies and Gentlemen, Let me at the onset express my gratitude to Equity Capital Resources Plc for inviting me to come and officially launch its collective investment scheme which I understand will be called “Equity Capital Resources Unit Trust” or ECRUT in short. This indeed is gratifying to everyone who is anxious to see our financial markets progress. As many of you gathered here already know, the Bank of Zambia in consultation with various stakeholders initiated and developed the Financial Sector Development Plan (FSDP) in 2004. The vision of this Plan is to have a stable, sound and market-based financial system that supports an efficient mobilisation and allocation of resources. It is therefore pleasing that the introduction of ECRUT takes us closer to fulfilling the vision of the FSDP. Ladies and Gentlemen, am sure you will agree with me that collective investment schemes are an indispensable part of market development with several benefits. One of the primary benefits of collective investment schemes is that small investors can have access to professional investment management. Many of our people are not conversant with financial investment matters, yet they are eager to enhance their wealth. Many simply do not have the capacity to identify and manage investments that are appropriate to their risk-return appetite.

I have been informed by the Chairman of Equity Capital Resources (ECR) Plc that the Company intends to list ECRUT on the stock exchange in the near future. When this commendable intention is achieved, ECRUT will be the first collective investment scheme to be publicly traded on the Stock Exchange in Zambia. With the calibre of men and women behind this investment vehicle, I am confident this will be achieved in the required time frame. When that time comes we want to turn back to this day and say “we were part of the birth of ECRUT”. The existence of the ECRUT shall provide means of resource mobilisation, bringing on board a collection of individual participation in the capital and money markets. This vehicle will  BIS Review 48/2008  1  facilitate the participation of investors who previously were not capable of participating in highly denominated securities in the financial sector. Ladies and Gentlemen, before I end my speech, let me quickly touch on an important aspect of collective investment schemes, that is, investor confidence in the managers and the industry itself. I believe by far this is the most important factor in whether a scheme can attract and maintain long-term investors. There must be a strong regulatory framework. Whereas there is a strong regulatory body in the Securities and Exchange Commission that vigorously administers the law to protect investors, fund managers must be committed to strong self-regulation and exercise professional ethics to the best interests of investors. This, Chairperson, is fundamental.
The pace of the further steps will take into account actual activity and inflation data with some optionality and gradualism, but we should at least move towards the neutral rate ii. And let me stress this: we will carefully monitor developments in the effective exchange rate, as a significant driver of imported inflation. A euro that is too weak would go against our price stability objective. More structurally, a key question is whether we are heading towards a fragmented International Financial System, at the expense of smooth trade and financial transactions? Despite the challenges, (I) we shouldn’t abandon, as a “creative frontier” on the horizon, the idea of cooperative multilateral International Financial System and (II) we should definitely develop the international role of the euro as a realistic step forward. **  Page 2 sur 7 I. We shouldn’t abandon, as a “creative frontier”, the idea of a cooperative multilateral International Financial System 1. The reasons why the topic of a renewed IFS has progressively faded to the background Since the 1970s, not much has happened to the international financial system. While the Bretton Woods system with fixed exchange rates and a gold anchor disappeared when the convertibility of the USD into gold came to end, the new international monetary system remained based on the USD. This dollar-based system gradually incorporated greater exchange rate flexibility. It allowed for a boom in trade and capital flows.

This is why I have spoken of the danger of fragmentation in payments akin to the Middle Age, with so-called “cryptocurrencies” having limited constituencies and acceptance. 3. But do we agree about the solutions? In principle yes: in order to avoid repeating past mistakes, we would need a collective momentum towards a stable and market oriented multipolar  Page 4 sur 7 International Financial System. A more multipolar IFS would help deal with the modern version of the Triffin dilemma: the supply of USD global safe assets is limited by the fiscal capacity of the US, while demand for them is bound to increase. It could also offer more monetary policy independence to Emerging Markets, by reducing the influence of US financial and real cycles spillovers. That said, the political conditions for such a major shift are not very favourable, to say the least: imagining the US, China and other major emerging economies converging today on a new IFS, while they didn’t for decades, could appear as utopian. Let me be more positive: we need to keep this concept of a more balanced multipolar system on the horizon, at least as a “creative frontier”. And we Europeans need to be active and committed on what depends on us. To move towards a more resilient global system, the euro should play a more important international role. It is a currency in a jurisdiction with solid democratic and stable institutions, including independent central banks and the rule of law.
2  BIS Review 48/2007  This was experimented in one of the development projects implemented by the Central Bank of Sri Lanka. In this particular project, bank financing was available for both micro and small businesses. One of the requirements of banks was the submission of a comprehensive business plan, acceptable to the banker, by the prospective micro-borrowers. But, none of the borrowers had the capacity to prepare them. As a result, the utilization of the moneys in the project became a problem. As a solution, it was decided to outsource the function to some business development consultants at a cost to the borrowers. Accordingly, a number of youth who had studied economics, business studies and accounting for the GCE Advanced Level were selected for training as business consultants. Then, they were appointed to provide consultancy services to potential entrepreneurs for a fee. The lending banks also paid a certain commission to them for services such as loan recovery and follow up work. The program worked well and a new generation of fee-based business consultants was developed by the project. At the end of the project, most of these consultants, having used their own expertise, started their own businesses. Another pertinent issue involved in microfinance delivery is how to reduce the transaction costs and make available the loans at the time they are needed by the borrowers. The transaction cost is simply the additional resources which a person has to spend, other than what is paid to the supplier, in order to complete a transaction.

The usual strategy adopted by governments to attack poverty has been the attainment of a high economic growth continuously over the long run. With that growth, it is expected that the benefits of economic uplifting would trickle down to lower levels of the society. As a result, the overall economic conditions of all segments of the population would elevate to a higher level. It will kill the absolute poverty levels. Some good examples are countries like Malaysia and South Korea. Both these countries were able to reduce absolute poverty from a very high level of over 50 percent to a very low level below 6 percent within about four decades. If macroeconomic growth can tackle poverty, the n why should one be bothered about microfinance? The reason is very clear. When macro-policies are adopted, there are certain gaps that are created in the alleviation of poverty. As a result, some segments of the society would experience a worsening of their situation. This is because all the people in a society are not capable of moving along with the market at the same speed. Some move faster than the market. They are the super-performers and stand to gain more. Some move at the same rate as the market. They attain a gain more or less equivalent to the market performance. There is no problem about both these categories. That is because they have the capacity to look after themselves.
Phase 4: Viability of large U.S. banking organizations The next phase of the crisis started in mid-November 2008, as both the stock market and credit default swaps suggested increasing doubts on the part of market participants that large U.S. financial institutions had sufficient capital to withstand the losses that might arise from further deterioration in the real economy. For example, on the weekend before Thanksgiving, the FDIC, Federal Reserve and U.S. Treasury, in response to intense market pressures, came up with a support package for Citigroup, followed by a similar package of support for Bank of America in January 2009. From the public’s perspective, these interventions were becoming harder to understand, and from a policymaker’s perspective, there seemed no end in sight. In the market’s eyes, many banking organizations had become “uninvestable.” Thus, as part of the Financial Stability Plan of the new administration, a comprehensive and forward-looking assessment of the capital needs of 19 bank holding companies with more than $ billion in assets was set in motion. Meanwhile, the Federal Reserve was reacting with great speed to the deepening recession by cutting the fed funds target to its lower bound of close to zero, starting large-scale purchases of agency debt, mortgage-backed securities and treasuries, and introducing a facility to re-invigorate the securitization market. It is important to understand that the objective of the Supervisory Capital Assessment Program (SCAP) – the so-called bank stress tests – was not to assess the solvency of the 19 companies.

Mervyn King: Monetary policy developments Speech by Mr Mervyn King, Governor of the Bank of England, at a dinner hosted by the IoD South West and the CBI, Bristol, 22 January 2008. *  *  *  It is four months since Northern Rock came to the Bank of England for support. And the headlines continue to be dominated by its fate. Northern Rock, however, is not the epicentre of the present global banking crisis. That lies in the very substantial losses made by many banks in the main financial centres as a result of the collapse of the US sub-prime mortgage market. Those losses, and the fear of future losses on a wider range of loans, pose a threat to the ability of the banking system to finance continued economic growth – the so-called credit crunch. Concerns about the implications of a credit crunch, not only for the health of the US but for the world economy, lie behind the sharp falls in global equity markets over the past week. So the next year will pose economic challenges for all of us – more so than at any time since the Bank of England was given its independence in 1997. Both industrialised and emerging market economies have been affected by the fall in asset prices but conditions vary across countries. It is striking that the banking crisis originated at the heart of the world’s major financial centres.
The origins of the crisis We are all aware that the sub-prime mortgage crisis in the US during 2007 and the subsequent collapse of Lehman Brothers in September 2008 sent shock waves to the financial markets that plunged the global economy into the most severe recession since the Great Depression of the 1930s. However, although these two events did trigger off the international financial crisis, the sovereign debt crisis in Europe was largely home-grown, characterised by cases of excessive risk-taking by banks, imprudent fiscal policies on the part of a number of governments as well as shortcomings in the institutional framework of Economic and Monetary Union. With the adoption of the euro, most euro area countries benefitted from the greater credibility that the monetary policy, decided collectively by the Eurosystem, offered within a legal framework that ensured its independence and promoted price stability as its primary objective. In addition the advent of the single currency also meant a significant step forward towards the completion of the EU single market, which was viewed as an important element in bringing about faster economic growth in the European Union. The establishment of the euro area led to a significant reduction in both nominal and real interest rates, especially for the fiscally weaker member states, as these converged to German benchmark levels.1 This reduction in interest rates, coupled with stronger economic growth expectations in the euro area, gave rise to faster growth in, and cheaper interest rates on, credit to both households and non-financial corporations in many of these countries.

First, it is set to run a budget deficit in 2015 and 2016 that will need to be corrected during the Troika programme review at the end of September, because Greece has introduced a medium-term fiscal strategy. Second, the ongoing programme reveals a financing gap in the second half of 2014 on the part of the donor countries, which will also need to be closed to ensure the involvement of the International Monetary Fund (IMF), because IMF involvement requires a programme that is fully funded for 12 months in advance. Is that the gap of around EUR 4 billion up to EUR 4.5 billion? I’m always amazed at the kind of speculation heard about such figures. That figure was given by the Minister of Finance Wolfgang Schäuble. The exact amount cannot be quantified at all yet, and I wouldn’t like to speculate. The level will for one depend on the extent to which Greece will be able to privatise assets. The more assets that Athens privatises, the narrower the gap will be. Greece will have to return to the capital markets in 2014, because government bonds will mature. Will it manage to do so? And if not: how will the ECB, which holds a large part of these bonds, react? According to the Greek Minister of Finance Ioannis Stournaras, Greece will try to return to the capital markets in the second half of the year. That is the right thing to do, and it remains to be seen if it will succeed.
We also supplement our analysis with a number of other indicators of resource utilisation in the economy. As I mentioned earlier, long-term sustainable growth in the economy is determined partly by technological developments in society. This means that production per hour worked shows an increasing trend over time and thus is one of the more important contributions to long-term growth. But long-term changes in the factors of production can also affect potential growth. If we measure the labour force’s contribution to production in the number of hours worked, one can express it simply as our long-term growth potential depending on how much we work and how productive we are. However, it is important to point out that it is the more long-term developments in productivity growth and the change in labour contributions that are significant in this context. 2  BIS Review 64/2004  I mentioned earlier that different methods of estimating potential growth can give quite different results. One of the reasons is that it is difficult to distinguish the more long-term sustainable trend from temporary developments. It is of course no easy task to determine whether a change is permanent when we receive new statistics on economic developments. However, it appears that this can even be difficult to determine afterwards, when studying the historical trend. As I intend to illustrate, this applies to both productivity and labour supply.

In recent years, both the percentage of people at work and the hours worked per person have fallen and thus provided a negative contribution to the change in the total number of hours worked in the economy. The fact that mean working time has fallen is partly due to a decline in overtime and normal working hours. The reason behind this development is not entirely clear. Cyclical effects as well as the effects of taxes and benefits are possible explanations. Seen in a longer-term perspective ahead, it is likely that households will tend to want to reduce the mean working time per person so as to use some of their increased prosperity in the form of more leisure time. So what conclusions can we draw regarding developments in the total number of hours worked in the economy on the basis of this review of the various components? Unfortunately, the prospects are not so bright if no measures are taken to improve the situation. In a long-term perspective, the demographic development is very unfavourable because the percentage of the population of working age is decreasing. The problems will be exacerbated if the rise in early retirement and long-term sick  2  The Swedish National Social Insurance Board, “Vem önskar lämna arbetslivet med förtidspension?”(Who wants to leave work on a sick pension? )’, RVF Analyserar 2004:7, and Statistics Sweden, Välfärd (Welfare), No. 1 2003.
More public equity has been issued so far this year than at the same point in any year in the past decade. [See slide 5 of accompanying deck]  But that issuance has all been by listed companies. On our estimates, the vast majority of the possible equity needed will be for companies not listed on a stock exchange. And so the challenge is to give a wide range of businesses every opportunity to access growth capital. That’s capital willing to invest in assets – like unlisted equity – that can’t easily be traded and doesn’t deliver a quick or stable return. Unlocking more growth capital  Unlocking more growth capital is not a new challenge. Three years ago, the Treasury launched a review of what it called Patient Capital. Since then, many changes have been made. The Pensions Regulator has clarified its guidance to funds. New funds, including British Patient Capital (a subsidiary of the British Business Bank), were established. And the Financial Conduct Authority now permits retail investors greater access to funds invested in illiquid assets. There is more to do. And the need for more equity finance to minimise the scarring to the economy now creates a case for ambition. A range of authorities have a role to play. Lots of attention tends to be given to schemes and ideas involving public money and the taxation of equity relative to debt.

Over the period 2000 to 2007, the market penetration rate, measured in terms of the number of life insurance policies in force as a proportion to the total population, increased from 31.5% in 2000 to 40% in 2007. Notwithstanding its wider reach of the market, life insurance coverage remained relatively low compared with the more developed markets in the region such as Japan, Korea and Singapore, which have penetration rates of more than 80%. The relatively low market penetration coupled with rising household incomes and high savings rate suggest a very positive outlook for the Malaysian insurance sector to grow extensively and presents tremendous opportunities for financial advisers to serve the Malaysian consumers. With increased uncertainty prevailing in the global economic outlook and in the financial markets, effective financial planning will assume greater prominence at both the retail and corporate levels. Households, in particular, will benefit from financial planning in order to be  BIS Review 136/2008  1  more self-reliant and resilient against the increased volatility in the financial markets. It is envisaged that the financial advisers would be able to play a role in providing financial solutions to consumers on how best to manage their wealth efficiently and effectively. Financial advisers will help mobilise the country’s financial resources to generate growth and further develop our insurance and takaful sector specifically and the financial system generally.
Possible impacts on the banking sector could be reduced with different tools: for instance, limiting the quantity of digital euro in circulation, and distributing it through commercial banks. Validating such an intermediated model would provide enough customer proximity and value added to intermediaries (like front-end solutions). The good news is that we now have a consistent European payments strategy. The challenge is that we have to implement it. The challenge is to deliver. And we do not have much time to win the battle – one to two years. This sense of urgency should lead us all to collective action now. As a conclusion, allow me to say a few words on French banks. They entered the crisis with a 3/4  BIS central bankers' speeches  sound financial situation both in terms of solvency and liquidity. They provided with great efficiency the vital liquidity shield that companies needed during the acute phase of the crisis. We, as supervisors, acted with pragmatism by easing some regulatory constraints. But pragmatism doesn’t mean laxity. Strong challenges are still ahead, including risk monitoring – as we are not yet out of the Covid crisis –, digitalisation, and improved profitability. But that is another story… that we might discuss together another time. Thank you for your attention. 1 Hannah Arendt “The Crisis in Education”, The Crisis of Culture. 2 Panagiotis Asimakopoulos, “What do EU capital markets look like on the other side of Brexit?

– Analysis of the  size and depth of capital markets in the EU27”, New financial, September 2019  4/4  BIS central bankers' speeches