samchain/econo-pairs-v1 huggingface dataset:
Caleb M Fundanga: The history and experiences of the financial sector and regulatory framework in Zambia Address by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Co-operative Bank Capitalisation Consultative Forum “The history and experiences of the financial sector and regulatory framework in Zambia”, Lusaka, 3 March 2011. *  *  *    The Honourable Minister of Agriculture and Co-operatives, Hon Eustarkio Kazonga, M.P;    The Board Chairman of the Co-operative Bank Zambia Limited, Mr Mulilo Kabesha;    Members of the Diplomatic Corps;    Distinguished Invited Guests;    Ladies and Gentlemen  It is with great pleasure and privilege to speak to you at this very important Consultative Forum. I have been requested to speak briefly on the history and some of the experiences of the financial sector in Zambia. Ladies and Gentlemen, as you are aware, considerable developments have been recorded in the Zambia economy in general and the financial sector in particular, following the liberalization of the economy in the early 1990’s. These developments include the proliferation of banks and non-bank financial institutions, which have necessitated the review of supervisory policies as well as the legal and regulatory frameworks in order re-align them to the liberalised environment.

A significant development relating to the Zambian financial sector was the decision to relocate the function of the Registrar of Banks and Financial Institutions to the Bank of Zambia from the Ministry of Finance and National Planning where it was previously located. This decision was taken in an effort to enhance regulatory oversight of banks and financial institutions starting from the licensing stage. Currently, all applicants have to be evaluated in line with relevant provisions of the Banking and Financial Services Act (BFSA) and international best practice such as the Basel Core Principles on Effective Banking Supervision. The intention is to ensure that only applicants who meet these stringent criteria enter the financial system in Zambia. This is crucial for fostering confidence and stability in the financial system. Mr Chairman, you may be aware that in the early stages of the reforms, a number of commercial banks faced serious problems and were subsequently liquidated. The closures were in part a consequence of the reforms. The reforms also highlighted some weaknesses in corporate governance arrangements at most failed banks. However, following improvements in the regulatory and supervisory frameworks, no bank closure has been recorded since 2002 and the banking sector has recorded significant growth. The growth in the sector can also be attributed to prudent fiscal and monetary policies aimed at achieving sustainable macroeconomic stability. This has been accomplished under a stable political environment and liberalised market conditions.
2  All speeches are available online at www.bankofengland.co.uk/speeches  2  Days Past: correspondent banking at the Bank of England in the years running up to 1917  Our story centres around Benjamin Strong, the first head of the New York Federal Reserve, who took a long ‘scouting trip’ to Europe in the Spring of 1916 – little more than two years after the formation of the Federal 1  Reserve System. The Bank of England, of course, had been around somewhat longer – 222 years longer, to be precise. But for much of that period it had seen little need to establish banking arrangements with fellow central banks, sitting as it did astride the enormous global sterling area, with no major alternative currency in sight. The first account, for the Bank of Japan, wasn’t opened until 1896 – and only three more (Greece, Australia and 2  Spain) followed in the pre-War years. As the American banker Willard Straight acidly put it: ‘the British idea of co-operation was that the other fellow does what the Britisher wants him to do’. 3  World War 1 changed all that. The declaration of war in July 1914 precipitated a severe financial crisis as confidence in banks collapsed.

Yet despite all that change the three key benefits of financial co-operation identified by Strong and Norman remain at least as relevant today as they did a century ago:  -  First, more central banks than ever before value the safe, confidential, reliable access to overseas reserve currencies, assets and payments offered by their peers. Safe – because central banks are free from insolvency in their domestic currency, are rigorously focused on minimising operational risk, and settle all payments in central bank money. Confidential – because central banks treat the information they receive with the greatest discretion, and are not subject to commercial incentives or conflicts of interest. And reliable – because central banks understand the policy priorities of their peers, and stand ready to provide the highest level of continuity of service. Today the Bank of England provides banking services to over 150 central banks and international financial institutions around the world – ten times more than in 1917. Those services include sterling payments, call and term deposits, and custody of securities and gold. The Bank’s gold repository remains the most active central bank service in the world, reflecting the United Kingdom’s lasting role as the pre-eminent wholesale gold trading centre. -  Second, access to central banking services underpins the international monetary system. Although the major economies no longer maintain fixed exchange rates, the international trading system relies  6 7  A version of the original March memorandum is held in the Bank of England Archives.
The criticism is rarely clear with regard to which of the statements it is based on, but my interpretation is that most of it is based on the first claim – that it is not so important to maintain confidence in the inflation target. Unfortunately, this rarely develops into any more detailed reasoning. Typically, the criticism tends to stop at monetary policy having been inappropriate, while reflections on the merits of a credible inflation target – and in particular on why the advantages of the current target should no longer apply – are almost always lacking. Essentially the criticism concerns whether or not to have an inflation target When thinking about it, this criticism is in fact quite remarkable. What it actually says is that even if confidence in the inflation target is beginning to fail quite clearly, the Riksbank should not do what it can to maintain it. In this sense, one can argue that the discussion is essentially about whether or not to have an inflation target, and perhaps even about whether or not to pursue an inflation-targeting policy at all, although it is rarely expressed in this way. I can only think of one earlier parallel. It was as long ago as the second half of 1994, after the Riksbank had decided to introduce an inflation target, but before it came into force in 1995.

6  BIS Review 73/2008  Historically the difference has been small… Average of annual percentage change 4  CPI CPIX  3  2  1  0 1985-  1990-  1995-  2000-  Sources: Statistics Sweden and the Riksbank  Capital stock index in the CPI and the real estate price index Annual percentage change 20  20  15  15  10  10  5  5  0  0  -5  -5 Capital stock index  -10  -10  Real estate index -15  -15  Real estate index, 40 qtrs moving average  -20  -20 90  92  94  96  98  00  02  04  06  08  Sources: Statistics Sweden and the Riksbank  BIS Review 73/2008  7  CPI and CPI with fixed interest rate Annual percentage change 4  4 CPI CPI with fixed interest rate  3  3  2  2  1  1  0  0  -1  -1 02  03  04  05  06  07  08  Sources: Statistics Sweden and the Riksbank  CPI, CPIX and CPI with fixed interest rate Annual percentage change 4  4  3  3  2  2 CPI with fixed interest rate CPI CPIX CPIX  1  1  0  0 06  07  08  09  10  11  Note: Dotted line represents forecast in MPU April 2008 Sources: Statistics Sweden and the Riksbank  8  BIS Review 73/2008
In fact, a recent study by the ECB shows that the closer a country comes to an excessive deficit, the more likely it is that the forecast the government presents officially will later turn out to be wrong. There is a strong bias towards unrealistic optimism once a country’s deficit approaches 3 per cent of GDP. Let me say something in this respect about the new member states. It is all too apparent that the collapse of Germany’s leading role in fiscal discipline has also set a bad example for some of the larger new member states. Given that public finances have deteriorated so much in Poland, Hungary and the Czech Republic during the first years of this century it is fortunate both for themselves and for the euro zone that these countries have postponed joining ERM II and the attempt to rapidly adopt the euro. Had they tried and locked their currencies within ERM II they may well have stayed in that position for a long time, becoming in the meantime targets for speculation - as their poor public finances would have lent little credibility to their overall economic policy. This was Sweden’s experience with the combination of a currency peg and deteriorating public finances in 1991-1992. But now there is another danger.

In fact those euro zone countries that have some sort of national transparent targets and evaluation of fiscal policy, such as Finland, have managed to retain some order in their public finances. The power of targets and transparency is that the public, with the help of comments from analysts in the media, can evaluate clearly how the government is doing in relation to a long-term norm. The idea of being on or off target is quite easy to grasp, and if the process is transparent, experts and the public alike will learn to trust the figures. In this area most countries still have a lot to do. It is a pity that  2  BIS Review 66/2004  government accounts, which affect everyone in a compulsory way, are less transparent, less well audited and less understood as the accounts of companies listed on the stock exchange, which only affect very few people and at their own risk. Sweden has a target of a 2 per cent surplus for the public sector over the business cycle, a figure that includes pension savings and that, given an ageing population, is in fact akin to targeting a balanced budget over the cycle. This target is present in the debate of every budget. The National Institute of Economic Research comments on the target and helps the public to understand it. This keeps the government accountable not only in the normal political sense but also in relation to the targets agreed upon.
We are working with a ‘toy model’ to make a few illustrative high level points around which to frame the QT discussion. I leave the details of the model to the Annex and discuss the intuition here. The starting point is a money demand equation for an NBFI. This relates the NBFI’s money holdings to the overall size of its portfolio and the relative return on money and risky assets. The implementation of QT implies that the NBFI will hold less money and more risky assets (the mirror image of the thought experiment that I discussed to describe the portfolio balance channel of QE transmission in the previous section). In order to persuade the NBFI to accept this shift, the return on the risky asset must rise relative to that on money. If a QT sale is announced and implemented simultaneously, the price of bonds must fall immediately in order to generate expectations of a holding period return in the future that will justify holding onto a greater share of risky assets in the portfolio following QT. The subtlety in the model is to observe that the holding period return on this risky asset will reflect (at least in part) an expected capital gain as the price of the asset changes. This matters particularly for the asset price impact of pre-announced sales.

Through VBI, Islamic financial institutions adopt a highly structured framework to assess how they create value and impact, for example, from economic, social and environmental perspectives. VBI accords equal emphasis to economic value creation and upholding of ethical values, and strengthens Islamic finance as a “uniting force for good”. The VBI initiative is currently bringing together the banking groups through a pioneering Community of Practitioners (CoP) to advance the sustainability agenda in a collaborative, concerted and synergistic approach. This includes forming close engagement with organisations that share similar sustainability aspirations. Through VBI, Islamic banks are taking the lead in advancing finance for the good. While these banks are still at early stages in their journeys, there are already concrete examples of VBI being put into action today as we see progress in embedding its elements in their financial products, practices and operations. Though VBI has a far wider scope, these early applications capitalise on contemporary sustainability themes. These include preferential financing rates for hybrid vehicles and green buildings, specialised financing scheme for women entrepreneurs and issuance of the world’s first Sustainable Development Goals (SDG) sukuk. Where VBI goes beyond are in provision of non-financial services bundled in financial solutions such as advisory, business network and relevant infrastructures to groom small clients with business potentials such as SMEs and micro finance. Alongside this move towards responsible financing, the CoP members are actively reviewing their business portfolios, identifying and prioritising VBI issues within their institutions and building the required capacity.
Open market operations are merely a means to an end – tools for implementing the FOMC’s decisions.1 In designing these operational tools, the Desk aims to effectively and efficiently implement the FOMC’s directives.2 Of course, Desk operations don’t take place in a vacuum. We  1  Additional policy tools related to depository institutions, such as the discount window, interest on reserves, and the Term Deposit Facility, are overseen by the Board of Governors of the Federal Reserve System and implemented by the Federal Reserve Banks. 2  The FOMC issues a “directive” to the New York Fed after each of its meetings. The directive outlines the approach to monetary policy that the FOMC considers appropriate for the time period between its policy meetings (for example, its target fed funds rate or range, or an amount of long-term securities to purchase) and authorizes the Desk to conduct transactions in the SOMA in furtherance of it. BIS central bankers’ speeches  1  operate in the open market, conducting transactions with a range of private market participants who are motivated by their own business needs, balance sheet constraints, regulatory incentives or disincentives, and individual perceptions of current and future economic conditions and risks. We rely on both internal and external infrastructure and systems to trade, settle, and clear our transactions.

Unlike Desk operations conducted with fixed quantities, the Desk wouldn’t need to estimate the appropriate amount of reverse repos to offer each day in order to absorb the quantity of reserve balances at the target rate.16 With IOER and an overnight, fixed-rate, full-allotment reverse repo facility, counterparties would determine the level of participation based on daily demand for overnight investments at a fixed rate that’s judged consistent with the FOMC’s overall policy stance. Market forces will therefore determine how to allocate the Federal Reserve’s liabilities between depository institutions holding them as reserves and money market funds, GSEs, and other non-bank financial institutions holding them as reverse repos. The effectiveness of an overnight, fixed-rate, full-allotment facility in helping to control overnight money market rates will depend on a range of factors, including whether a sufficiently wide set of non-bank counterparties has access to the facility. Following seven waves of counterparty expansions since 2009, the Desk currently has 139 reverse repo counterparties, covering 94 of the largest 2a-7 money market funds, 6 GSEs, 18 banks, and the 21 primary dealers. Taken together, these institutions represent an estimated 25 percent of all overnight Treasury tri-party repo volume. More counterparties could certainly be added, and we’re in the process of considering how best to proceed. The efficacy of the facility will also depend on factors such as the regulatory and balance sheet constraints of counterparties and the level of competition in the markets.
Hence, a front-loaded monetary tightening was implemented in the same period, which compensated for the distortion in inflation expectations. As of August, we decided to enhance the predictability of the Turkish lira liquidity policy in order to limit the impacts of global monetary policy uncertainties on the domestic economy. To this end, we adopted a strategy of reducing interest rate uncertainty by creating a framework where the relationship between global interest rates and domestic interest rates has largely weakened and market rates have become more sensitive to domestic macroeconomic developments as they should be. BIS central bankers’ speeches  1  In the third quarter, we continued to provide the market with foreign exchange liquidity via foreign exchange selling auctions, which fed into the growing Turkish lira liquidity deficit in the market (Chart 3). We cut the share of one-week repo in total funding in this quarter, which led to an increase in the share of funds from overnight and monthly lending facilities. Correspondingly, the CBRT’s average funding rate and the BIST interbank overnight repo rate increased (Chart 4). Moreover, in line with its strategy of enhancing the predictability of liquidity management, we have been sharing more information about the frequency and timing of the additional tightening since August. Recently, due to our cautious monetary stance, the Interbank Repo Market rates have been mostly hovering between 6.75 and 7.75 percent.

We expect domestic demand developments to support the downtrend in inflation and the improvement in current account deficit in the months to come. To sum up, a co-analysis of domestic and foreign demand reveals that forecasts are based on an outlook in which the contribution of aggregate demand conditions to the end-2013 inflation has slightly increased compared to the previous reporting period. This revision drove the end-2013 inflation forecast up by 0.1 points. As you all know, food, energy and import prices also play a great role in inflation forecasts. Therefore, before moving on to forecasts, I will briefly talk about our assumptions regarding these variables. Import prices remained below the assumptions of the July Inflation Report in the third quarter. On the other hand, oil prices materialized slightly above the assumptions (Chart 20). In line with the average futures prices in the first three weeks of October, the average assumption for 2013, which was set as USD 107 in July, was revised upwards to USD 109. This revision added 0.1 percentage points to the end-2013 inflation forecast. We preserved our assumption for the annual rate of increase in food prices as 7 percent. In other words, it was assumed that the recent unfavorable course of unprocessed food prices would be temporary. Before moving on to forecasts, I will talk about our assumptions regarding public finance. Medium-term projections are based on the assumption that no additional tax adjustments will be introduced to tobacco and energy products the rest of the year.
There is a long history of involvement by the Bank of England in dealing with the problems of banks in the UK in order to underpin the stability of the financial system, much longer than the history of banking supervision. The history of the Bank in the nineteenth century features quite a few such interventions. More recently, although none came amid conditions comparable to those which occurred last autumn, the Bank was extensively involved in resolving problems in the secondary banking crisis of the 1970s, in Johnson Matthey Bankers in the 1980s, and then in the early 90s with a number of smaller banks. My own first involvement with resolving banks came at that time, with the resolution of National Mortgage Bank. We now face a much bigger challenge in terms of building a more robust financial system. There are three parts to this task: regulation, structure and resolution. Today, I am going to talk about the last of these. In the past, our resolution toolkit was limited. We could use the Bank of England’s own financial resources, as we did with Johnson Matthey Bankers and National Mortgage Bank. Or, we could determine that it was not necessary to provide financial support on grounds of a threat to the financial system, but nonetheless that it would be helpful to facilitate the orderly winding-up of an institution by undertaking what I would call “mopping up activities” of a type which only a central bank can typically undertake because it provides a safe house and neutral party.

One point that is particularly relevant to banks that finance companies or projects in countries like China is that the rules of the environmental game can change very quickly. The authorities in China are getting serious about cutting emissions and pollution, as the requirement by the Beijing Municipal Government on the Shougang Steel Group to cut back its output has shown. The problem in China is that regulations are not always strictly enforced. But this can change overnight, resulting in major compliance problems for the companies concerned and increased risk for the banks that have lent to them. Hong Kong banks which lend into China would therefore be well advised to keep this in mind. Finally, banks should pay close regard to their own “corporate ecology”. Banks can contribute to environmental protection by the way in which they manage their use of resources in their own operations. In this way banks can be responsible corporate citizens while at the same time reducing business costs. The type of measures that can be adopted include saving on energy consumption, recycling of paper, waste management, purchasing environmentally friendly products and use of video conferencing to cut down on unnecessary travel. Use of office automation such as email can also help to reduce the consumption of paper, provided of course that staff can be encouraged not to print out the messages.