samchain/econo-pairs-v1 huggingface dataset:
Ardian Fullani: The Albanian economy and the banking sector in 2010 Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the reception of the Albanian Association of Banks, with bankers and representatives of banks operating in Albania, Tirana, 17 December 2010. *  *  *  Dear bank executive managers, Dear participants, It is always a pleasure to meet once the year-end approaches to make a summary of events that characterized the Albanian economy and the banking sector over the course of 2010. The Albanian economy is forecast to grow in 2010 slightly higher than in 2009. Industry and services provided the largest contribution to the positive economic growth, yielding as well a relative improvement in the balance of payments’ current account. Lek’s exchange rate was more stable compared with the preceding year, whilst consumer prices fluctuated within the Bank of Albania’s target of 3%. Fiscal policy engaged in a process of fiscal consolidation during the present year, which we consider as critical in order to preserve the budget deficit and domestic debt levels and keep the level of interest payments in check. Developments in the financial system attest to the full recovery of public confidence in the banking system. As at end of the third quarter of 2010, total banking sector assets accounted for 81.7% of GDP, up 12.2% y-o-y versus merely 0.9% in the same period in 2009. Deposit growth and higher capital account provided the major positive contribution to the expansion of banking sector activity.

This time the likelihood that the disinflation program will succeed is high for three main reasons. First, there is now political stability and consensus on implementing this inflation-reduction policy. Second, all parts of society are aware that there is no alternative to solving, now, our budget and debt burden problems. Third, the technical 3  BIS Review 109/1999  foundation has already been prepared. These three factors underline the importance of the new program. Accordingly, the inflation targets have been set at 25% for the year 2000 and 10% for 2001. Consistent with these inflation targets for the next two years, fiscal policy will be conducted according to a broad-based approach aimed at improving all aspects of public sector revenues and expenditures. With this effort, monetary policy will continue to be supportive of fiscal policies. Although we should not expect a radical change in the implementation of monetary policy, its efficiency will definitely improve in step with the improvement of the fiscal stance. I would also like to underline once more the importance of Turkey’s recent efforts towards disinflation. As you know, in the 1980s the Turkish economy succeeded in making the transition from a closed economy to a market-oriented one. Turkey aims, through this more recent effort, to build a macroeconomic infrastructure suitable for membership in the global economy, where low inflation and a sustainable growth rate, combined with sound and well functioning financial and real sectors, are the minimum standards.
One of the three Financial Stability Forum Working Groups is considering the quality and timeliness of disclosure of exposures to and of highly leveraged institutions. This category includes hedge funds. Proposals for direct regulation of internationally mobile funds are unlikely to be workable. But many commentators remain suspicious, regarding such funds as like children playing just out of sight who are told – “I don’t know what you’re doing, but, whatever it is, stop it”. The IMF itself has become more open about the release of information. During an eighteen-month experiment countries will be able to publish their Article IV reports. And more background information, including policy papers and programme reviews, is now available. All this should improve the transparency and accountability of national governments, the private sector and the IMF. But there is one further step on which progress is urgently required. In a world of sovereign states, countries cannot, and should not, be compelled to disclose information if they do not wish to do so. But countries should not be able to claim to be transparent when in fact they are not. A crucial substitute for the inability to make transparency mandatory is that we need transparency about transparency. That is why the G22 Report recommended that the IMF – in the context of its Article IV consultations – prepare a Transparency Report for each country summarising the degree to which that economy complied with disclosure standards and codes of conduct.

In the domestic context, the LOLR ensures that neither the managers nor the equity holders of the institution receiving support are allowed to benefit. Internationally, it is not easy for the IMF to penalise those responsible for management of the economy, nor to distinguish between those citizens that have been responsible for excessive risk-taking and those who will be the innocent victims of the consequences of a financial crisis. It is the ordinary taxpayers in emerging market countries who will have to bear the burden of servicing loans from the IMF.5 4  Fischer, S (1999), “On the Need for an International Lender of Last Resort”, IMF. 5  A point stressed by Calomiris (“The IMF’s Imprudent Role as Lender of Last Resort”, Cato Journal, Vol. 17 No. 3 1998) although he underestimates, in my view, the possibility of liquidity runs as seen, for example, in Korea in 1997. BIS Review 95/1999  4  Absent a world government, it is difficult to see a credible ILOLR on the horizon. The reason is the simple maxim: “it’s the politics, stupid”. The second purist solution, at the opposite end of the spectrum, is the imposition of permanent capital controls. In other words, a return to the world in which the Bretton Woods institutions were created half a century ago. The advantage of capital controls is that they prevent the liquidity runs that result from currency and maturity mismatch of the financial sector. India did not experience a financial crisis, Korea did.
To enhance the enabling infrastructure for SME financing, the Credit Bureau Malaysia was established in 2008 to provide comprehensive and credible credit information and ratings for SMEs in Malaysia. More than 1.1 million credit reports have now been generated by Credit Bureau Malaysia to facilitate access to financing for businesses since its inception. In addition, SMEs with limited collateral or track record are able to benefit from the credit guarantee facility provided by Credit Guarantee Corporation that extends its services to include advisory. In efforts to ensure simple, efficient and prompt application process, Bank Negara Malaysia and the Association of Banks in Malaysia (ABM) introduced PARTNER 1, a simplified application form and documentation checklist which has now been adopted by 8 domestic  BIS central bankers’ speeches  1  banking institutions. This initiative has been enhanced in PARTNER 2, in which reasons are provided for loan applications that have not been successful. This is to provide to the SMEs the opportunity to address the weaknesses or limitation thereby enhancing their potential to gain access for financing. In addition, SMEs facing challenges in their business operations, may now seek assistance from the various agencies namely the SME Corporation’s One Referral Centre and the Bank Negara Malaysia’s Small Debt Resolution Scheme (SDRS) when confronted with financial stress. Under the Small Debt Resolution Scheme, a total of 894 SMEs have now been assisted since its establishment in 2005.

Thanks to the development of new information and communication technologies, there has been an increase in trade in services, which - until recently - have been considered nontradable. The importance of the services sector in the economy should be stressed, as this sector constitutes a 70-percent share of the GDP in the developed economies. The whole accounting departments or customer support call centres outsourced are only some of the services that take advantage of new technologies. Some of those innovations have already become a permanent element of our reality: the possibility to purchase an airline ticket via the Internet, creation of inventory control systems in IT companies, a possibility to gather and process information on consumer behaviour. The aforementioned solutions embody the new forms of labour organisation and the development of new products and services, which are becoming increasingly common. Research by van Ark 29 indicates that the results of a comparison of the growth in labour productivity in the services sector in the USA and the EU-15 in the past 10 years are in favour of the USA. The advantage of the USA has resulted primarily from a higher labour productivity in retail and wholesale trade and in the financial services. Among the causes for the lower increase in labour productivity in the EU countries one should mention lower innovative capabilities of the European companies and a lack of reforms that could have forced the sector to take advantage of its potential.
Whereas the need for better risk management has been the main driving force behind the recent wave in innovation in more advanced financial markets, this is not the case in less developed markets. The drive towards financial innovation in some instances can largely be attributed to the need to improve or maintain profitability. When talking about financial innovation, an important aspect that one needs to consider is whether or not the process is resulting in a reduction in the cost of doing business and providing banking services, on one hand, and whether it is translating into better pricing, on the other hand. We should therefore, not be surprised that innovation does not always yield the expected benefit of reduced prices. Innovation is clearly an important phenomenon of any sector of a modern economy. Successful financial innovation must reduce costs and result in the provision of improved services and affordable financial resources to users, particularly to the productive sector. A low level of innovation and development in the financial sector produces a weak impact of financial intermediation on economic growth. The right kind of innovation obviously would help the financial sector fulfill its core functions; and if the financial sector fulfilled its functions better and at lower cost, it would almost surely contribute to growth and societal well-being.

I am glad that we were able to have the service of Prof. Peter Sinclair of university of Birmingham who h as served as Director, Centre for Banking Studies, of the Bank of England to conduct this programme. Ladies and gentlemen, let me highlight some interesting developments in the evolution of central banking and some challenges faced by central bankers. The role of central banks has evolved over past several decades. You may recall that the original task of central banks was not the conducting of monetary policy or supporting the banking system but financing government spending. The oldest central bank of the world, the Bank of Sweden was established in 1668 largely as means to finance military spending . The Bank of England was said to have been created in 1694 to fund a war with France. Even as recently as late 1940’s a labour chancellor of the exchequer, Stafford Cripps was said to have described the Bank of England as “ his bank”. Today, it is a taboo for most central banks to finance government deficits. Most countries have managed their affairs without a central bank for a long time. At the beginning of this century there were only 18 central banks. The USA managed without a central bank until 1913. Private banks issued their own currency notes and coins and banking crises were fairly frequent. The Federal Reserve Bank of USA was established mainly to supervise banks and act as lender of last resort.
Unlike in other economies with problems of excess household and corporate debt, such as the United Kingdom and the United States, in Spain weak nominal growth has weighed on the process of debt re-balancing and has made it reside, above all, on a contraction in lending. The last year in which lending posted a positive rate of change in Spain was in 2008. Since then, net credit flows, both to households and to non-financial corporations, have been  BIS central bankers’ speeches  3  negative overall, although there was a very slight increase in lending to households for house purchase in 2010. In 2012, total lending to the resident non-financial private-sector fell by 5.8%; credit to households fell by 3.7% while that to non-financial corporations decreased by 8%. When total credit to productive activities excluding construction, real estate development and financial services is considered, the decline was not as sharp, standing at 6%. Indeed, credit to productive activities excluding construction, real estate development and financial services was slightly positive in 2010, but has been negative in 2011, 2012 and in 2013 to date. In considering these developments it should evidently be borne in mind that credit for construction and real estate development activities had to shrink as the cyclical upturn ended and the excesses of the period 2004–2008 had to be corrected.

Competitiveness and market reform To put the favourable external sector performance on a firm footing, we must build on and further the improvements in competitiveness. In this connection, the markets for factors and goods and services must function in a way conducive to containing costs, margins and prices. Clearly, in the labour market, we need a stable employment-promoting regulatory framework which, at the same time, affords sufficient flexibility to attune working conditions to the circumstances of the business cycle. Indeed, greater moderation and flexibility can be seen in wage-setting in recent quarters, as can – and this is also important – a lesser degree of indexation. A more intensive use of the wage and non-wage flexibility mechanisms envisaged in the new regulatory framework would lend continuity to this ongoing improvement in competitiveness. But our problems of lack of flexibility and competition were not and are not only in the labour market. In the market for goods and services, the recently approved National Reform Plan includes a set of measures aimed at removing obstacles to competition, attaining productivity gains in various sectors and improving the functioning of various institutions. Private-sector deleveraging and lending The overindebtedness of households and firms is another of the major problems that arose in the last upturn in the Spanish economy. Private debt/GDP ratios have fallen from their peaks in 2010, but at a relatively slow pace. The main explanation for this sluggishness lies in the downturn in private-sector nominal income since the onset of the crisis.
It is of course important to ensure that the e-krona does not have negative consequences for monetary policy or financial stability. As I explained at the start, all of  14 For more information on this, see Armelius et al. (2,020). 15 See, for instance, Ingves (2020). See also the Riksbank's consultation response regarding the new Sveriges Riks-  bank Act (2019). 16 The banks would still have access to central bank money as they have money in accounts with the Riksbank. 8 [35]  these areas are interconnected and therefore we and others have analysed them. 17 This is an exciting field of research, and more analysis is needed, although it is nevertheless possible to draw some conclusions. With regard to monetary policy, it must be possible to distinguish between an ekrona with or without interest. An interest-bearing e-krona would not have any major consequences for monetary policy in Sweden. Sometimes people believe it would be easier to set very low negative interest rates with an interest-bearing ekrona, but this is not true. The policy rate’s lower bound is currently determined by there being cash for households to hold instead of having money in an account with a bank. Similarly, the banks have cash as the only alternative to holding money in accounts with the Riksbank. 18 However, holding large amounts of cash entails certain costs, such as for transport and insurance, and we therefore can set the policy rate a little below zero.

The participants are evaluated to a greater extent against other market participants. This increases the incentives to do the same as everyone else, so that one at least does not report poorer results than the average. Information on other participants’ behaviour has also become more easily accessible, which can further increase the risk of herd behaviour. This increases the risks of liquidity problems, particularly in the event of financial crises, when an increasing number want to sell similar assets at the same time. Moreover, market participants’ tendency to take risks has probably increased as they are evaluated in an increasingly short-term perspective. 31 It has become simpler to choose investments in securities with a specific liquidity, maturity and risk through so-called securitisation. What this means is that credit institutions, often banks, with a portfolio of for instance mortgages, sells this portfolio as a package to another credit institution. The buyer then converts the package into new securities with specific risks and interest terms – this is what comprises the actual securitisation – and sells the package on to new investors. These new packages are attractive investment objects as they often provide a good return in relation to the risk. Securitisation can increase the efficiency of the financial system, but it also entails risks, which was showed by the global financial crisis 2008-2009. One reason for the risks possibly increasing is if securitisation affects the banks’ capital requirements.
With the build up of household debt in many countries, and releveraging of parts of the corporate sector, that would not have been a happy prospect. That, taking the industrialised world as a whole, monetary credibility has been sustained without aggressive policy action may owe something to the reasons for the increases in energy and other commodity prices – namely, the rise of China, India and other Asian economies which, as well as boosting global demand, has also been putting downward pressure on internationally traded goods prices. But, as the Bank has argued before, the way these relative price changes play out in terms of headline consumer price inflation depends on the overall path of aggregate nominal demand. And that in turn owes something to the behaviour of central banks. The textbook response to a cost shock is supposedly to allow the price level to rise, with the associated temporary pick up in inflation being just that – temporary. In the jargon of central banking, the “first round effects should be accommodated” in order to contain output volatility; but any second-round effects on inflation, through wage bargaining and medium-term inflation expectations, should of course be prevented. What of practice? Well, notwithstanding the rise in inflation in the UK over the past eighteen months, it is moot whether any of the major central banks did in fact fully accommodate the first-round effects of the oil price rise.

Firstly, the correction of the real estate sector and of the high level of private-sector debt, which had started prior to the crisis, already entailed significant elements of spending containment. Further, however, the forceful effects of the international financial crisis and of the global recessionary trends compounded this situation, amplifying the contraction of domestic demand, eliminating any possible external support and exacerbating the loss of confidence. This latter factor was, moreover, particularly affected by the impact of the far-reaching deterioration of the labour market on income expectations, an important matter which I shall return to later. As a result of these factors, there was a marked decline in Spanish household spending, both on consumption and on residential investment. In 2008, both items accounted jointly for 80% of the decline in the contribution of national demand to output, which stood at slightly more than 4 pp for the year on average. Naturally, the heightening of the financial crisis in the final stretch of the year, and the subsequent deterioration in macroeconomic expectations, saw the contractionary impulses spread to the other components of domestic spending, meaning that business investment ultimately collapsed in the second half of the year. Indeed, the sole prop of spending in 2008 was net external demand, which showed a marked increase with a contribution of 1 pp to GDP growth for the year as a whole and of 2.3 pp in the final quarter.
Having said this, the workshop you are attending today and tomorrow has the following key objectives: i.  to explain the practical aspects of “Context Establishment” and the “Risk Identification” processes so as to ensure that you fully understand these initial, but critical steps, in the risk management process so as to enable you to assist your respective departments to complete these important stages of the process; and  ii. to remind you of your role and responsibilities, as Risk Liaison Officers, Alternates and Risk Coordinating Officers, in the Risk Management Framework. Ladies and Gentlemen: Allow me to reiterate what I said during the risk sensitization workshops – the success of the Bank of Zambia Risk Management Framework will in a large measure depend on how well this process will be understood and how well its implementation at departmental level will be facilitated by you. As Risk Liaison Officers, Alternates and Risk Coordinating Officers for your respective departments, you will be expected to not only provide leadership and guidance to your respective departments on risk management matters, but you will also be required to play a catalytic role in the whole risk management process. As the proverbial saying goes, the buck for managing the risks in your respective Departments stops at you! The Risk Management Department’s role will remain confined to the coordination and facilitation of the Bank-wide risk management activities. In conclusion, I wish to urge you all to take a keen interest in the deliberations of this workshop.

It is senior management’s hope that the facilitation that will be given in these workshops will go a long way in addressing the identified teething problems. It is extremely important that you all realize from the very outset that you will be the anchors for the success of this process for your respective departments. For this reason, it is imperative that you understand in full the processes that will be discussed in this workshop. Senior management’s expectation is that you will acquire the necessary tools to enable you facilitate the proper completion of the Context Establishment and Risk Identification exercises within your respective departments. Ladies and Gentlemen: Allow me to give you a brief background on the implementation of the Risk Management Framework at the Bank of Zambia. You will recall that starting in October 2006 through April 2007, the Risk Management Department embarked on a programme of sensitizing all the members of staff and the Board of Directors on the establishment of the risk management framework at the Bank. Given that these workshops had coverage of 99% of all Bank of Zambia staff, I am more than confident that most of you were participants in those workshops. The end of this series of workshops, marked the end of Phase I of the implementation programme of the Risk Management Framework at the Bank. Following the end of the risk sensitization workshops the next stage required the implementation of the framework in the business areas.