samchain/econo-pairs-v1 huggingface dataset:
Lorenzo Bini Smaghi: Towards the G8 – strategies for emerging from the crisis Speech by Mr Lorenzo Bini Smaghi, Member of the Executive Board of the European Central Bank, at the Università LUISS Guido Carli, Rome, 27 May 2009. *  *  *  I would like to start by thanking the organisers of this conference for the invitation to reflect together on the topics related to the next G8 summit. There is no doubt that the economic and financial crisis, the most serious of the post-war period, will take centre stage at the upcoming international meetings. Today’s conference is entitled “Strategies for emerging from the crisis”. It is right to speak of strategies, because intervention is required at a number of different levels. These concern financial regulation, the governance of institutions and companies, the ethical behaviour of economic agents and legislators, and economic policies. Looking at the composition of the panel for this conference, it seems to me that my comparative advantages chiefly relate to this last area, that of economic policies. There is no doubt that the economic policies of recent years have played a role in creating the conditions which have led us to this crisis. They were not the only factor, perhaps not even the main one, but they were important, because they tended to heighten, rather than to counter, the procyclical behaviour of agents.

Caleb M Fundanga: Access to finance – corporate governance and sustainability Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official opening of the Microfinance and Small to Medium Enterprises Conference on “Access to Finance: Corporate Governance and Sustainability”, Lusaka, 17 June 2008. *  *  *  • Honourable Felix Mutati, MP – Minister of Commerce, Trade and Industry; • Mr Michael Mundashi – Non-Executive Director Standard Chartered Bank; • Mrs Mizinga Melu – Managing Director Standard Chartered Bank • Mr Prashant Thakker – Global Head of Microfinance Institutions of Standard CharteredBank • Distinguished Guests, Ladies and Gentlemen I am honoured to have this opportunity to make keynote remarks at this conference on Microfinance Institutions and Small to Medium Enterprises organised by Standard Chartered Bank, whose theme is “Access to Finance: Corporate Governance and Sustainability”. I wish to extend a warm welcome to all participants, particularly those that have travelled from outside the country. I hope that you will find time to see some of the tourist spots of Lusaka and experience the warm hospitality that Zambia has to offer. Distinguished Guests, following the liberalisation of the Zambian economy in the early 1990’s, the number of small- and medium-scale enterprises (SMEs) has increased significantly as the Government divested from running business in the economy to pave way for increased participation of the private sector.
Work is under way to determine whether insurance would benefit from a special resolution regime that overrides normal insolvency rules in order to enhance the ability to ensure continuity of critical contacts through, say, the transfer to business to another firm. I will return to this subject later in this lecture because it is one that we should consider carefully. My general view is that the policyholder protection objective for insurance points to the need for a resolution regime for insurers, but the important issue is to be clear on what sort of regime. There is one further area of insurance that for me clinches the case for the policyholder protection objective in the PRA. I almost mention “With Profits” with trepidation, but I am afraid I must do so at this stage. With about £ of policy values outstanding, and policy maturities that can run into decades hence, With Profits is clearly a legacy that will be very much with us for a good while yet. Consequently, I do think that the industry and the authorities need to be alert to its inherent risks and complexities. In thinking about the implications of With Profits, let me step back for a moment. In broad terms, I can see two distinct types of financial contract involving deposits and savings. A deposit contract with a bank has at its core the promise that the bank will return the full value of the deposit at any time when it is contractually obliged to do so.

In contrast, a life insurer that enters run-off continues to collect regular premiums on its existing in-force life insurance policies. Moreover, it needs to continue to pay its obligations (e.g. annuities-in-payment) on the exact day contracted whereas a non-life insurer in run-off has some greater flexibility to pay claims to match its cash flow. Finally, a life insurer in run-off needs to honour contractual policy surrender rights. These features of life insurers draw out the difference in economic interest between near-term and far-term policyholders, and one who has a right of surrender and one who does not. Moreover as life insurers are making long-term promises to policyholders, they often seek to match those commitments dynamically, using short-term derivatives, and therefore rely on continued access to those derivatives and the willingness of counterparties to take such exposures to a firm in run-off. These derivative positions will not be more idiosyncratic like traditional insurance, but will be determined by the overall direction of financial market prices, giving scope for more system-wide problems. I described earlier the issues I see with more traditional With-Profit contracts. The issues I highlighted were not so much to do with definite features of the contract between the insurer and the policyholder but with the uncertainty around the contract itself arising from the substantial discretion afforded to the insurers’ management to determine final policy charges and returns.
When we adjust the forecast of the real exchange rate for the expected difference in inflation between Sweden and the euro area, we get similar development paths for the nominal krona/euro rate. As differences in inflation are expected to be small, the forecast strengthening of the real rate is also reflected in the nominal rate. Towards the end of the forecast period, the rate should lie, according to the assessments of the Riksbank, within an interval of approximately 8.20 to 9 kronor per euro. The forecast for the rate at the end of 2003, however, consists of a narrower interval, around 8.50 to around 9 kronor per euro. Consequently, should Sweden join ERM2 around the end of the year, this kind of estimate would advocate a suitable central rate between the interval 8.50 to around 9 kronor per euro. It should be noted that the models imply an expected strengthening in both real and nominal terms but that this strengthening from next year onward will be rather limited. When choosing a central rate, it is vital to find a rate vis-à-vis the euro that is consistent with a balanced development in the Swedish economy in both the short and long term. It is important to remember that the real exchange rate, i.e. the relative price between baskets of goods in Sweden and the euro area Member States would be variable even if were to introduce the euro as our currency. But the adjustment would then occur through the relative rate of price increases.

In addition, the latitude of changes in regulation is much more limited than that of interest rates. A more constructive approach may be to design rule-based countercyclical regulation with a clear purpose to minimize the risk of financial crisis. Nevertheless, we still need to learn more about the interactions between monetary and financial policies. Final remarks A natural reaction to a crisis is to think that everything is wrong and that all must be changed. Emerging markets, and in particular Chile, performed well during the crisis, and above all during the recovery. Therefore, a first lesson must be on the factors that produced these good results, and macroeconomic management was certainly central to the rapid recovery. The financial system was resilient, which shows that the regulatory framework was appropriate. However, our role is not to congratulate ourselves for our achievements in the past, but to look at strengthening our macroeconomic framework. As development proceeds, new challenges arise due to financial innovation, and it is extremely important to look for lessons while the crisis unfolds, to take advantage of financial development without risking financial stability. There is a need to study the interactions between monetary and financial policies further, especially given the challenges stemming from the global outlook. Implementing monetary policy in a flexible inflation targeting framework has shown its benefits; incorporating financial frictions and the appropriate policies should help us to navigate better in a very uncertain world.
Christian Noyer: World financial crisis – public and private strategies to overcome the crisis Speech by Mr Christian Noyer, Governor of the Bank of France, at Paris-Europlace, Dubai, 22 January 2009. *  *  *  Ladies and Gentlemen, It is a great pleasure for me to be here and share some thoughts on the financial crisis and on solutions that may be found to overcome the situation. It is too early to draw definitive lessons from recent events in financial markets. It is however vital to start reflecting on the experience of the last few months. Even more in periods of tension than in normal times, action and reflection should reinforce one another. It is at the very moment of managing the crisis that we lay the foundations for the future financial system. Having said that, I propose to discuss with you two main topics: •  The nature of the financial crisis  •  The policies implemented to address it both from a public and a private sector perspective. The nature of the crisis The crisis first emerged as a liquidity crisis. The first symptoms appeared at the beginning of August 2007 when serious disruptions surfaced on the inter-bank market in the Western world. More than a year later, tensions on money markets are still with us. Recent months have witnessed abnormal levels of spreads, a shortening of maturities, and the contraction, or even closure, of some market segments.

Through spill-over, these tensions are also affecting non-financial corporations and, more broadly the financing of the economy. They also have spilled over to emerging market economies, which had until the autumn 2008 remained largely unaffected. The crisis also emerged as a crisis of securitisation. Securitisation is an old and successful technique used to refinance a range of loans. What was new about it is that it got used extensively in highly unstable financial structures. These were financing short-term illiquid and complex assets whose value proved to be uncertain and contingent upon models. The instability of such structures was largely masked. Indeed, cheap money allowed easy refinancing of poor quality debt and of assets with uncertain value. Also, favourable ratings and credit enhancements artificially boosted the quality of loans underlying structured products. The rise in defaults on such loans, first on subprime mortgages, triggered a chain of reactions whose consequences are still unfolding now. Credit protections proved illusory. Liquidity dried up much more quickly than it had appeared. Rating agencies massively, suddenly and sharply downgraded products which until then were deemed of the highest quality. The demise of the “new” securitisation chain highlights two fundamental realities. The first one is that far from being spread across the whole system, credit risk was implicitly or explicitly concentrated in the hands of specific institutions, foremost among which were the major investment banks.
In such a situation, the central bank would have to buy the domestic currency and pay with foreign exchange reserves, which are finite and would eventually run out. When the market realises that there is a difference between maintaining a fixed exchange rate when the  12  McCallum, B. (2000), “Theoretical analysis regarding a zero lower bound on interest rates”. Journal of Money, Credit, and Banking. v. 32, 870-904. 13  See Svensson, Lars E.O. (2001), "The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap," Monetary and Economic Studies 19(S-1), February, 277-312; Svensson, Lars E.O. (2003), "Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others," Journal of Economic Perspectives, 17(4) 145-166. 6  BIS Review 19/2009  currency is strong and when it is weak, the high demand for the domestic currency will cease and the foreign exchange reserves will return to a more normal level. This method is a very drastic action. It shows that the central bank really means business and lends credibility to the price level target. It may therefore affect expectations of the future price level much more than any other measure. The method is verifiable as it consists of action and not just talk, and its logic is very clear. Raised inflation expectations would reduce the real interest rate, stimulate the real economy and increase inflation, and the price level would move upwards towards the price level target.

Thomas Jordan: Financial stability developments of relevance Introductory remarks by Mr Thomas Jordan, Vice-Chairman of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Berne, 15 December 2011. *  *  *  In my introductory remarks today, I would like to look at the most important developments in the area of financial stability that have taken place since the publication of our most recent Financial Stability Report in June of this year. Our latest analysis reaffirms the need for action which we had already identified back then. Firstly, in view of the high level of risk associated with the current global economic environment, the big banks must – to the extent possible – push quickly ahead with the expansion of their loss-absorbing capital base. Secondly, given the medium-term risks in the real estate market, which are particularly affecting domestically focused banks, it is vital that an effective macroprudential policy framework be developed. International developments of relevance for financial stability The global economic and financial conditions which affect the stability of the Swiss financial system worsened in the second half of 2011. As my colleague, Philipp Hildebrand, has already mentioned, the outlook for global growth is currently subdued. A major reason for this is the sovereign debt crisis which has been building up in peripheral euro area countries for the last two years or so and is now threatening to spill over into the core countries of the euro area.
Developing as an invoicing currency, for instance in energy markets or in the context of free trade agreements, would be important steps to gain a global role.viii Indeed, it would create the need to store euros for future trades, and consequently lead to the development of a full range of euro-based financial tools. 3. Safeguarding cross-border payments by technological advances in international financial infrastructures The euro area should remain on the frontier for cross-border payments, including the G20 agenda adopted in October 2021. The G20 roadmap for 2027 has indeed committed to bring profound improvements in this area including in setting ambitious targets on costs, speed, and accessibility of cross-border payments. But the challenge for all the stakeholders, central banks, regulators as well as the private sector, is to deliver and ultimately meet the expectations of end-users. This remains a strategic priority for the Banque de France, which in parallel has paved the way for a more prospective solution: namely a  Page 7 sur 7 wholesale CBDC that could be issued by the Eurosystem, deploying experiments such as the Jura project of cross border wholesale payments in coordination with the BIS and the Swiss National Bank. ** In the 1960s, US Secretary of Treasury Henry Fowler warned that "Providing reserves and exchanges for the whole world is too much for one country and one currency to bear." ix To Fowler, we answer: “We in the euro area are happy to help.” I thank you for your attention and I wish you a good forum.

i  Lagarde, C., Challenges along Europe’s road, speech, 11 May 2022 Villeroy de Galhau, F., The Eurosystem and its monetary policy: from an “impossible dilemma” to a possible roadmap for normalisation, speech, 6 May 2022 iii QJE paper by Fahri and Maggiori (2018) iv See the Council conclusions on achieving the EU’s economic and financial strategic autonomy in an open economy: one year after the Commission’s Communication. v Villeroy de Galhau, F., Capital Markets Union: unleashing Europe’s potential, speech, 30 November 2021 vi ECB report on RIE : only 60% of extra-euro area exports of goods were invoiced in euro in 2020 vii Recent research by Amiti, Itskhoki and Konings (2020) viii See the document Trade and investments in energy in the context of the EU common commercial policy ix Quote available here https://www.imf.org/external/np/exr/center/mm/eng/mm_sc_03.htm ii
We must all continue doing all we can to emerge from the current situation. Today, however, I wanted to pause and look beyond the crisis. For one thing, we do not know how deep and long it may be. But what is certain is that this crisis will end. We are certain we will finally emerge from it. This is not wishful thinking, but an empirical regularity. The economy has worked this way at least since the time Joseph interpreted the Pharaoh's dream about lean and fat cows. I wanted to focus today on the future of the Spanish economy because the essentially macroeconomic dimension of the current crisis makes us forget certain things: that our main problems are structural; that our chief task is to improve and boost productivity; that we ought to seize the moment to reform our regulations and institutions; and because whatever we do to improve productivity does not run counter to exiting the crisis but, quite on the contrary, may help us emerge more rapidly from it. To conclude, let me reiterate what I said earlier. If I’ve talked of only one area of structural reform, namely labour reform, it is because I think it is the most important one for relaunching corporate start-ups and reducing unemployment. But is it not the only area of reform, and nor are others less necessary.

Without sufficient social acceptance this debate will obviously not even be joined, so it is very important to clearly underline the objectives pursued which I’ve repeated ad nauseam in this speech, but which I shall attempt to express again in a different way so as not to tire you. We should all agree that the best protection against unemployment is not that which concerns itself with subsidising the unemployed, but that which ensures that the majority do not lose their job. We should admit that it is useful to allow employers to improve their productivity because that way we will see higher real wage growth. And, finally, we should let workers take the opportunity to switch to better-paid jobs without losing a substantial part of their protection in the event that they lose such jobs. You will have realised that my approach to the debate on labour market reform is far removed from that of those who confine it to the question of whether or not to lower dismissal costs. In my view it is a mistake to debate cheaper firing alone, and I believe that we can only make headway if we focus on finding formulae that allow us to increase productivity, to reduce the numbers of unemployed and to improve workers' wages. The fact that Spain is today more advanced than other European countries in many areas that I mentioned at the start of my speech should not let us forget that there are still some fields in which we can learn from others.
(a)  Classic principal/agent problems  Following the work of Jensen and Meckling (1976), the most extensively studied cost of separation arises when management pursues their own private interests at the expense of shareholders: for example, through corporate perks such as private jets or sponsored football teams, empire-building such as value-destroying acquisitions, or rent extraction through excessive executive remuneration. This is a classic principal/agent problem. Those theoretical concerns gained practical prominence during the 1970s. The response then was, on the face of it, ingenious: to align shareholder and managerial incentives, remuneration contracts for management needed simply to be linked to shareholder returns. This could be achieved by paying managers not in cash but in equity or in equity-linked instruments, such as stock options. And so it came to pass. Between 1980 and 1994, the average value of stock options granted to CEOs of large US companies rose by almost 700%, while salaries and bonuses rose by less than 100% (Hall and Liebman (1998)). The proportion of companies remunerating their CEOs in stock more than doubled. Those trends have continued apace in the two decades since. In 1994, US CEO compensation was split roughly one third salary, one third bonus and one third stock and stock options. By 2006, the dawn of the crisis, that split was less than 20% salary, less than 30% bonus and more than half stock and stock options. Among banks, the latter fraction was higher still. Whether this shift in compensation practices put a lid on CEO rent-seeking seems altogether more questionable.

Until 1826, the number of partners in a note-issuing bank in England was limited to six. The six-partner rule for English banks was relaxed in 1826. But it was not until 1858 that English banks were allowed to limit their liability, three years after non-financial institutions. This was recognition that the risks posed by banks were on an altogether greater scale. Even after legislation was passed, the initial response by banks was lukewarm. Their directors fretted about the signal that limited liability sent to depositors. That concern was reinforced when Overend and Gurney failed in 1866; it had adopted limited liability just months before its failure. For the eleven British banks with unlimited liability that failed between 1836 and 1878, every depositor had been paid out in full (Turner (2014)). 6  6  Turner (2014) Table 5.6. BIS central bankers’ speeches  3  Shareholders’ willingness to do so was helped by them vetting share transfers to exclude owners without sufficient funds. Indeed, banks’ shareholders remained liable even after they had sold their shares: in Scotland, former shareholders were liable for debts incurred when they had been a shareholder, while in England and Ireland a shareholder remained liable for three years after they had sold their shares (Button et al (2015)). But critics of unlimited liability for banks were becoming increasingly vocal.