samchain/econo-pairs-v1 huggingface dataset:
And this, coupled with the challenges that lie ahead, has led us to look at ways in which corporate governance among the banks might be further enhanced. If I could sum up our objective, it would be to try to reassert the role of the board of directors in banks. While the day-to-day running of banks should certainly be left in the hands of the management, the board must play a leadership role in approving the objectives, strategy and business plans of the bank, monitoring the performance of management and ensuring that the internal control and risk management systems of the bank are effective. The board must also make sure that the bank conducts its affairs with integrity and in accordance with high ethical standards. The board is part of the system of checks and balances that ensures that neither large shareholders nor management abuse their power and that decisions are taken with the bank’s best interests in mind. If the board does not play its full part, a vacuum in leadership will be created. This vacuum may be filled by the shareholders becoming directly involved in running the bank’s affairs, or by the executive management acting more or less in isolation. In either case, the board of directors is bypassed and checks and balances are lost. The HKMA has recently issued for consultation a draft guideline for banks and other authorized institutions which sets out what the HKMA expects of them in relation to corporate governance. The guideline aims to establish minimum standards.

Mr Carse: The importance of corporate governance in banks  Speech by Mr David Carse, Deputy Chief Executive of the Hong Kong Monetary Authority, at The Year 2000 Millennium Dinner of The Association of International Accountants - Hong Kong Branch, Hong Kong Bankers Club, Hong Kong, on 17 March 2000. *  *  *  Ladies and gentlemen, I am very pleased to be here this evening to speak to the Association on the subject of corporate governance in banks. I have chosen this as my theme both because it is highly topical for reasons that I will explain later and because it should be of particular interest to this audience. The Association plays an important role in the training and promotion of the accounting profession; and accountants are a vital component in corporate governance not simply in their specific role as auditors but also as a source of highly trained directors and managers. I will begin by giving you a brief situation report on the banking sector because this is relevant to the governance issue. Clearly, the situation is looking a lot better than it has done for the last two years. As the 1999 results released so far have shown, the performance of individual banks is by no means uniform. Some have done a lot better than others, depending on such factors as the mix of their business and where they are in the provisioning cycle.
There also needs to be greater clarity about the Fund’s obligations, and how it is to be held to account for fulfilling them. A new Surveillance Decision The 1977 Surveillance Decision needs to be replaced by a coherent and comprehensive set of principles covering all aspects of the Fund’s surveillance. A new Decision should start from the overarching objective to promote external stability. Consistent with this, it should shift the emphasis toward multilateral surveillance and the analysis of policy spillovers. And, unlike the 1977 Decision, it should cover both exchange rate policies and domestic policies insofar as they may affect external stability, rather than exchange rate policies, per se. This is a key area where the consensus has moved on since the late 1970s. It is now well recognised that exchange rate policies cannot be divorced from domestic policies. Where exchange rates are allowed to float freely, the paths they take will be affected by a wide range of domestic factors, including both monetary and fiscal policies. These policies can have significant foreign exchange and spill-over effects even when they are not implemented for an explicit balance of payments purpose. But even where nominal exchange rates are pegged, competitiveness and hence  4  BIS Review 103/2006  trade flows depend crucially on relative inflation rates, which reflect domestic monetary and financial policies. So both the effects of a fixed exchange rate, and questions about whether such a peg is sustainable at a given level, depend fundamentally on other domestic policies.

This brings me to the crux of the matter: can IMF surveillance really make much difference, even if it is reformed in the way I have described? It is important to recognise that surveillance - especially multilateral surveillance - is a very different kind of activity from the monitoring of reform programmes that may be linked to Fund financial assistance packages. Lending programmes have exerted considerable apparent leverage over countries’ behaviour at least in the short term, through so called ‘conditionality’. In recent years the Fund’s lending activities have gone into steep, and possibly irreversible, decline. But leverage of this kind has never been available to force policy change on countries who do not borrow from the Fund, a category which for the past 25 years has included all large industrialised countries. The ‘traction’ of surveillance depends critically on the Fund’s ability to influence the policies that countries choose to pursue. But is it realistic to suppose that the Fund can any have real influence over the countries whose policies matter most? The Fund’s constitution is cast in terms of the obligations that members owe to each other and to the Fund. Such obligations are not without legal content, still less without value. But the effectiveness of  6  BIS Review 103/2006  surveillance cannot rest on the strength or otherwise of any treaty-based sanctions that might be used against members who fail to meet their obligations.
The Basel Committee is thus introducing quantitative liquidity requirements for banks for the first time. Basel III works with two liquidity measures – one short-term and one long-term. The shortterm measure is based on, in principle, every bank having sufficient liquid assets to survive for at least 30 days. It is difficult to see such a requirement as unreasonable. The long-term measure, in principle, limits the gap between the maturity of a bank’s assets and the maturity of its debts. This limits the duration risk of the bank. …and particularly the regulation of systemically-important banks A particular focus has been placed on systemic risks and the most systemically-important institutions. To a great extent, this is a work in progress. So far, the Basel Committee has  1  2  In principle, Basel III defines Common Equity Tier 1 as share capital and previous profits. BIS central bankers’ speeches  identified almost 30 global systemically-important banks (G-SIBs). The list was published last week and includes one of the major Swedish banks, as you may have noticed. The Committee feels that it is particularly important that these banks have extra strong resilience. Those identified as G-SIBs should thus have an additional capital buffer, the size of which depends on how systemically important each bank is deemed to be on a global level. A framework should be put in place for how the authorities in different countries should handle them if they find themselves teetering on the brink.

However, formulating the right policy responses to monetary policy spillovers requires a better understanding of various spillover channels as well as mitigating factors that help reduce the sensitivity of EMEs to global monetary policy shocks. I would therefore like to thank you all for taking the time to join our Workshop today, which brings together seasoned researchers and policymakers dedicated to understanding these vital issues. I look forward to their insights and I hope you enjoy the Workshop. Thank you. Last revision date : 25 August 2022
However, we can talk in terms of a radical change in the Swedish economy in one important respect with regard to the relationship between growth and inflation. Inflation expectations in Sweden seem to have stabilised around 2%, which indicates that the target for price stability has attained high credibility. During the 1970s and 1980s, inflation amounted to 8% on average. This means that wage-earners, landlords, central and local government and entrepreneurs now calculate with quite different nominal price increases than previously in their budgets and their pricing decisions. However, this is not an expression of a new economy but rather indicates a return to the conditions that existed in the first two decades after the Second World War. Developments during the Korean War clearly show the importance of low inflation expectations for the development of the economy. The well-based expectations made it possible to restore the economy to a rate of inflation of 3% a year after inflation had risen to 20%. The return to low inflation could take place without any dramatic restraint and without mass unemployment. Comparisons between this year’s wage development and wage development during the previous high inflation period are a strong illustration that high nominal wage increases do not have a positive correlation with real wage increases. While real wage increases this year are expected to total around 3%, wage earners have periodically experienced reductions in real wages in the period 1975 to 1995 and on average only slightly over a half per cent increase.

Mr Bergström elucidates the economic situation in Sweden  Speech by Mr Villy Bergström, Deputy Governor of the Sveriges Riksbank, at the HSB Finance Day, HSB Bank, held in Stockholm on 18 November 1999. *  *  *  The prospects for the Swedish economy look better than for a very long time. We might have to go back several decades to find a period with such favourable conditions as those we are now experiencing. It is estimated that the Swedish economy will grow by as much as 3.6% this year, and the Riksbank forecasts that growth will be slightly higher next year. Despite the marked fall in production at the beginning of the 1990s, around 13% more is being produced now than at the end of the 1980s when overheating was worst. Part of the income from production has been used to pay off our foreign debt, which grew during the 1980s in a way that was unsustainable in the long term. This has been reflected in Sweden’s financial balance with other countries, i.e. the current account balance, which has been in surplus for a number of years and is expected to total SEK40 billion this year. After a number of years of large deficits, central government finances are now in surplus for the second year running. From having had the second worst central government budget balance in the whole EU at the beginning of the 1990s, Sweden’s public finances are now among the strongest in the union.
We need the skills of both sides: the agility, innovations, customer relations of commercial banks; and the trust and stability guaranteed by Central banks. Yes, digital commercial bank money already exists, and is usually regarded as safe as central bank money; it will remain very significant in payment amounts, and you may possibly develop tokenised deposits. But the trust commercial bank money inspires is not only due to each bank’s private signature; it’s anchored by its full equivalence and permanent convertibility, 1:1, to the public money issued by the  Page 5 of 6 Central bank. Loosing this public anchor – in a world of digital payments without CBDC – would sooner or later mean undermining this private trust; think of the 19th century in the United States, before the Fed, where there were regularly confidence crises. To make it crystal-clear, a digital euro will not lead to disintermediation. It will be distributed through banks: we central banks have absolutely no intention to open private accounts. In response to some other worries, there will be no financial stability risks, due to possible significant outflows from commercial bank money to central bank money: a holding limit will apply to digital euro accounts, and it will ensure that the digital euro serves as a payment means, more than as a store of value. So commercial banks can and should get on board with full confidence. We are, in this 21st century as in the two previous ones, complementary and not competitors on money and payments.

3 And these levels are comparable to the corresponding Libor rates in the US dollar and Pound sterling money markets. 4 Thus, over the past six months, conditions in the euro area money markets have significantly improved and effectively are similar to – or even better than – those in other major money markets. In addition, the provision of liquidity by the ECB to the euro area banking system has been extraordinary in size and scope. The size of Eurosystem’s balance sheet in mid-February had reached 1.53 trillion euro (or 1.96 trillion US dollars), compared with 0.91 trillion euro before the eruption of the crisis. The expansion of the Eurosystem’s balance sheet by about 70% over this period reflects the various non-standard measures implemented by the ECB, including the provision of unlimited funding in euro at fixed interest rates over periods up to six months as well as the supply of liquidity in other currencies, notably US dollars, on the basis of a swap agreement with the Federal Reserve. The reduction in the policy rates and the increased supply of reserves were fully in line with the ECB’s primary objective of preserving price stability over the medium term, as inflation pressures eased and inflation risks diminished, and helped to alleviate pressures in the credit market and mitigate financial stability risks. 3  Euribor rates for longer maturities (on 25 January 2009) are following: 6 months: 1.71%; 9 months: 1.78%; 1 year: 1.86%.
The case study that will provide the experience of Palau regarding the failure of one of its biggest bank, will not only remind us of the reality and the crucial role of bank supervisors, but it should bring us together to learn from it and be better prepared for the possibility of such crisis occurring in our own respective countries. I also note with interest that you will be covering the Basel Revised Core Principles which, as I mentioned earlier, reflect the ever changing environment in which banks operate, that international standards continue to change as the environment of risks also changes. And as part of the global financial system, we all need, to some extent, to adapt to such changes. Although some of these changes may not directly affect us due to our narrow market base, others can impact on our financial system indirectly. One of these changes would be the Basel II new capital adequacy framework that has already been advanced for some years for adoption. From experience, the new Capital Accord will have significant impact on our limited resources and our capacity to administer and properly implement. In this connection, I am pleased to acknowledge the presence of resource experts, Ms Elizabeth Roberts, Director of the Financial Stability Institute (FSI) at the Bank for International Settlements, Basel; Messrs Graham Johnson and Chris Gaskell from the Australian Prudential Regulatory Authority (APRA); Mr Kim Norris, Director, International Advisory Group, OSFI, Canada; and experts from the IFC.

[The chief executive of Northern Rock, Mr Adam Applegarth, in unveiling his bank’s first-half results last July, announced that “the medium-term outlook for the company is very positive,” He spoke of a credit book that was “robust”. But, who would have guessed that less than two months later, Britain’s fifth-largest mortgage lender would be fighting for its life, its branches besieged by customers demanding their savings back? The run on Northern Rock is the most dramatic symptom of the contagion gripping the financial markets. Here was a bank that had grown rich from the innovations of recent years, using abundantly stocked wholesale markets to fund its lively growth, using those same markets to offload bits of it loan book as and when they became unattractive. But the very innovations on which Northern Rock thrived have savaged its business. The company does no lending overseas. Nevertheless, its fate was determined by the distant turmoil in America’s mortgage market. When that spilled over into the securities markets, the money markets that Northern Rock had depended on for years, dried up in a single day at the start of last August. The brave new world that enabled banks like Northern Rock to grow so fast is founded on “securitization” – the process that transform mortgages, credit-card receivables and other financial assets into marketable securities – and the innovation it spawned in “structured” products. This was a revolution that brought huge gains.
I would also like to stress that price stability is one of the most important factors supporting economic growth. The second main objective of Eesti Pank is to support the stability of the financial system, especially the credibility of the banking system. Similarly to choices made in monetary policy, Eesti Pank has over the years proceeded from clear and comprehensible principles also in banking. We have firmly supported the common banking market of the EU and the NordicBaltic region. In addition, we have emphasised the relevance of the capitalisation and liquidity of the banks operating here. Eesti Pank kept the obligatory minimum capital adequacy ratio at the level of 10% and increased the reserve requirement to 15% of the total liabilities of a bank. Against this background I dare to say that so far the banking sector has coped well with the crisis. The average capital adequacy ratio of the Estonian banking sector is currently above 22%. The capitalisation of the subsidiaries of the banks operating in Estonia is absolutely sufficient to cope with loan losses markedly bigger than the current estimated 2% level without including additional capital. The credibility of the banks operating in Estonia is thus not threatened by a possible increase in the share of so-called bad loans in the loan portfolio in the course of this year compared to the current 5.2%. The integration of the banking system with the Scandinavian and European markets, which is one of the most important factors supporting stabilisation, is another issue.

Membership in ERM2, for a country on its way into monetary union, is different to the systems of fixed exchange rates in which Sweden has previously participated. This is partly due to the fact that the central rate chosen can be expected to become the conversion rate for entry into EMU. This would reduce the risk of uncertainty over the krona’s development. As a member in ERM2, there would still be scope for the Riksbank to promote price stability, although this scope would diminish the closer to entry we come. Responsibility for stabilising the economy would gradually shift over to fiscal policy. If Sweden were to join monetary union, the interest rate level would be set by the ECB. The differences that exist between the Riksbank’s and ECB’s work methods should not be exaggerated. With the ECB’s latest clarifications, this has become even more obvious. But as regards the internal preparation processes, clarity and transparency, a number of differences remain. If the referendum results in a “yes” to the euro, I will be talking an active part in these issues as a member of the ECB Governing Council. The Riksbank also works with financial stability. In this area, the institutional changes would not be that great as a result of Sweden joining monetary union. In the long term, however, the financial system in Europe would be reshaped.
Undeniably, the international crisis worsened our economy’s situation by prompting a worldwide recession and the closure of the funding markets. But, as we now fortunately acknowledge, in Spain we had our own problems that needed resolving. Another example of not realising or not wishing to acknowledge problems can be seen in those who claim that, to redress our high budget deficit, it is not vital to make spending cuts. It’s not right to say that spending cuts, appropriately adopted in my view by the central government and by certain regional governments, were not needed. A responsible attitude should lead to recognition that it is not possible to reduce a deficit that had climbed to 11% to 3% of GDP without making far-reaching cuts in public spending. As to the second task, namely the search for solutions to resolve our problems, our Parliament has correctly identified two of the changes needed to tackle the problems created by the imbalances incubated during the expansionary phase: the reduction of the budget deficit and the restructuring of part of our banking system. As regards fiscal consolidation, the Stability Programme that has targeted a deficit of 3% by 2013 is an ambitious plan. It has been recognised by the European Union and has been met in its first year. Accordingly, all tiers of government – central, regional and local alike – must rigorously fulfil the targets set for the current and coming years.

We know that quality should mean better performance and the creation of greater value. And there are many ways in which we can look at how organisations manage quality. The seven criteria of your Quality Award, including leadership, strategy and knowledge management for instance, provide an excellent framework. But when it comes to an international financial centre like Hong Kong, what are the essential qualities we should look for? And how do we achieve – or strengthen – those qualities? 6. Let’s start with the essentials. The basic function of a financial system, simply put, is to move money around. The system channels capital from those who have a surplus to those who need it. It moves capital around the economy like the heart pumps blood around the body. This enables daily economic activities like paying salaries and buying groceries. 7. But an international financial centre has a further dimension. It doesn’t just serve the needs of the local economy. It also enables a host of companies, institutions and individuals from around the world to meet more complex needs, such as financing supply chains and managing risk. With these domestic and global dimensions in mind, I’d like to discuss two important qualities of Hong Kong as a leading international financial centre. Resilience is key 8. The first quality is resilience. It’s easy to think of aspects of finance in which safety and reliability are vital. In a quality financial system, we take these for granted.