samchain/econo-pairs-v1 huggingface dataset:
Mugur Isărescu: Nine lessons from the current financial crisis Speech by Dr Mugur Isărescu, Governor of the National Bank of Romania and Member of the Romanian Academy, during the session titled “What lessons can be learned from the current economic crisis?”, organised by the Economics, Legal and Sociology Department within the Romanian Academy, in co-operation with "Costin C. Kiritescu" National Institute of Economic Research and the ”ESEN Reflection Group” Romanian National Committee, Romanian Academy, Bucharest, 14 April 2009. *  *  *  Your Excellency, Mr. President of the Romanian Academy, Dear colleagues, Ladies and gentlemen, I have recently talked about the causes of the current financial crisis and the manner in which it affects the Romanian economy at Babeş Bolyai University in Cluj-Napoca and Transilvania University in Braşov. Let me just recall here that the current crisis on the US subprime mortgage market was only the trigger of the global financial crisis. Its root causes were both macroeconomic and microeconomic in nature. Plentiful liquidity was the catalyst for the merging of multiple microeconomic causes such as securitisation, financial deleveraging, rifts in the business model of rating agencies and excessive deregulation, which resulted in today's financial crisis. World economies are hit by this crisis to various extents, depending on the vulnerabilities of each and their exposure to toxic assets. The response to the crisis is contingent upon the fundamental principles we believe in, the available resources, the institutions and the instruments we can make use of.

As a result, we are seeing a record number of job openings, supply bottlenecks in sectors such as autos, and sharp increases in prices for some high-indemand goods and services. To get an idea of how fast the economy is restarting, it’s useful to look at gross domestic product, or GDP. Fueled by rapid growth in consumer spending, business investment, and housing, I expect inflation-adjusted, or real, GDP to increase seven percent this year. If that forecast comes true, that would be the fastest year-over-year growth rate since 1984. This strong growth in demand is translating into large numbers of people getting back to work. More than half a million jobs were added in May, which is good progress. But, I cannot stress enough that we still have a long way to go to get back to full strength. For example, there are still over seven million fewer jobs today than before the pandemic. Underlying these numbers are sizable movements of people in the labor market. Employers are hiring at a rapid clip, with nearly seven million people moving from the ranks of non-employed to employed per month. At the same time, people are leaving jobs in elevated numbers, either to look for new work or to exit the labor force altogether. These big movements in the labor market, both in hires and quits, reflect the extraordinary nature of the pandemic, as employers and workers adapt to rapidly changing circumstances. What should we take from all of this?
However, satisfaction of this demand brings us back to the problem of the market dynamics of globalisation, which, as we all learnt from bitter experience, can have very negative effects. In a discussion about bond market development in the region, it would be useful for us to remind ourselves what this problem is. The pattern of the flow of international funds in Asia has, for some time now and encouraged by financial liberalisation, been characterised by a two-way traffic of investment flows. In the one direction, there is the very substantial outflow to the industrialised economies, predominantly in the form of bond investments but equity investment also featured, and characterised by a large element of public funds. In the other direction, there is the inflow of private sector foreign funds, of more, or less, substantial magnitude, depending on the macroeconomic circumstances, in the form, relatively speaking, of much more equity related investments. This recycling of funds brought benefits and risks. The greater presence of foreign funds, mostly in institutional form, and managed and serviced by highly versatile foreign financial intermediaries, in domestic financial markets in the region, no doubt, promoted financial sector development. Indeed, the overall efficiency, including the level of sophistication, of financial intermediation in the region has been substantially enhanced, contributing to economic growth and development. But, as we have observed, it also presents considerable difficulty to monetary authorities in the region in the maintenance of monetary and financial stability.

Market capitalisation of domestic bond markets more than doubled over the past nine years - from an average of 20% of combined GDP in 1995 to 47% in 2003. During the same period, the combined share of bond markets in total financing grew from 11% to 19%. Bond markets are, therefore, a growth industry. Quite apart from the considerable initiatives by the private sector, bond market development has been a particular target of initiatives by governments and multilateral agencies. There are good reasons for this. My intention in this short address is to set out briefly these reasons - to put the case for an Asian bond market - and then to examine some of the work that is in progress in this field, particularly from the point of view of the central banks. The need for an Asian bond market The underdeveloped state of the Asian bond market - compared with the bond markets in the industrialised economies - has been well documented in recent years. Despite the impressive growth of the size of the Asian bond market that I have just mentioned, it still lags behind the developed economies in terms of breadth and depth. For example, the market capitalisation of the domestic bond market in the US, the UK and Japan is equivalent to over 150% of the GDP compared with just 47% in ex-Japan Asia. Activity in the secondary market is also relatively low.
Bandid Nijathaworn: Financial developments and the Thai banking sector Keynote address by Dr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the Third Euromoney Thailand Investment Forum, Bangkok, 10 June 2009. *  *  *  Thank you and Good morning First let me thank Euromoney for the invitation. It is an honour to be speaking to you today. For the last few years that I have been coming to this forum to speak, I find the session to be very useful as it provides an excellent opportunity for us at the Bank of Thailand to interact and share our views with investors on Thailand’s current issues, including our policies. So, it is a pleasure to be here this morning. My topic today is about financial developments and the Thai banking sector. Given the limitations of time, I want to focus my remark today on two issues. The first is the short-term issue about the current economic and financial conditions, and the policy response that we have had in trying to strengthen the process of recovery. Next, I will speak on the mediumterm issue of financial sector reform, beginning with how we see the new or the post-crisis financial landscape emerging and our plan to respond to these changes in the context of our financial sector Master Plan. First, the current conditions. Latest economic data in Thailand continues to show deterioration in economic activities as evidenced by the estimated decline of 7.1 percent in this year’s first quarter GDP growth.

These strengths are found in the sector’s strong capital base, its limited exposure to subprime-related and other toxic assets, and its low reliance on external funding. As a result, the impact of the crisis on the Thai banking system so far has been limited. The Thai banking system is resilient with good fundamentals, and continues to function normally to support the economy. In the last two quarters, despite the consecutive negative GDP growths, the performance of the Thai banking sector remains satisfactory. The sector continues to see profits in the last two quarters, while the increase in the non-performing loans has not been large. This robust performance reflects a number of common responses that have been undertaken by the banks to manage the increase in credit and market risks. The responses include parring down of investment in foreign assets, lowering the loan growth target in line with the economy, strengthening risk management and credit standards, paying close attention to liquidity, and acting early to assist clients to adjust to the impact of the shock. These measures have helped banks to contain credit risk, and so far we have seen the gross NPL ratio rising slightly to 5.5 percent in March from 5.3 percent in December. As for the Bank of Thailand, our approach to bank supervision during this time of global stress is to ensure that the banking system is healthy, and the system continues to operate fully to support the economy with good risk management and adequate capital.
7  All speeches are available online at www.bankofengland.co.uk/speeches  7  One of the lessons of the crisis and the ensuing ten years was that we need to continuously challenge ourselves to ensure that we are prepared for the future. The Bank has taken that to heart. Today I want to highlight two innovations. First, the Bank has recently supplemented the ability to provide liquidity to our expanded set of members by ensuring that we are operationally capable of accepting equity collateral, should the need ever arise. And, second, in pursuit of a more diverse and resilient financial landscape in the UK, we have been progressing work to enable Islamic banks to hold Bank of England reserves to meet their regulatory requirements for holdings of high quality liquid assets in a way consistent with Islamic commercial jurisprudence. And as a result, today I can announce that we will shortly be establishing a new subsidiary of the Bank, to house the Shari’ah Compliant Facility; this will be a special purpose vehicle, called the Bank of England Alternative Liquidity Facility (BEALF). This will also be the first non-interest based liquidity facility to be offered by a major Western central bank, providing important structural support to the UK’s Islamic finance sector, and further strengthening the UK’s position as an international financial centre. 22  Enhancing our policy readiness  With all of this capability comes the need for accountability. We are running a much larger balance sheet than ever before.

Given its proven success at maintaining market rates in line with Bank Rate, as well as the benefits of operational continuity, the Bank is minded to keep using a variant of the current floor system for controlling market rates. And, as the quantity of reserves supplied falls towards the quantity demanded by market participants, we will stand ready to meet SMF participants’ demand for additional reserves through regular open market operations. In addition, there is a strong case for holding some longer maturity assets, such as gilts, to back the stable portion of demand for banknotes, and indeed we had already started to do this ahead of the financial crisis. 29  How large a quantity of reserves SMF participants will demand, and therefore how large our future balance sheet will be, is an open and difficult question. As well as changing our own monetary policy toolkit, the financial crisis has changed the behaviour of financial institutions, including in ways that are significant for the size of our balance sheet. In particular their demand for reserves and for liquid assets more generally, is much greater than it was before the crisis. That reflects a combination of tighter regulation which requires them to hold larger buffers of liquid assets, and more prudent management which means that banks have learnt the lessons of the crisis and the value of maintaining liquidity, as well as the fourfold increase in the number of SMF participants. This change was not caused by QE and the expansion of our balance sheet.
And when analysing the potential existence of gaps to the current framework, we are taken a very comprehensive approach, meaning that we will look in detail to the regulatory, supervisory and disclosure dimensions. I think we all agree that the topic of climate change is all-encompassing when it comes to the potential impact on banks, and therefore requires a holistic approach when considering potential responses. On disclosure, we are conscious that there are a lot of initiatives underway focused on developing a globally consistent approach to sustainability reporting. But across these initiatives, we still need to bridge gaps so as to build a common disclosure foundation. Given the evolving initiatives and uncertainties related to the measurement of climate-related financial risks, we will consider in near term an appropriate Basel Committee response to support these initiatives. The Pillar 3 framework is a powerful instrument when it comes to disclosure. It is designed in a modular way and can therefore can be easily updated and adapted to reflect additional risks. On supervision, both the Basel Core Principles and Pillar 2 framework are flexible to accommodate any additional supervisory responses. The Committee is also exploring sound supervisory practices associated with climate-related financial risks. The target is to prepare a report for discussion with the Committee in Q3 and publish the report by year-end (subject to the Committee’s approval).

Finally on regulation, I note with regret that far too often the discussion appears to focus solely on the notion of introducing so-called “green supporting factors” to seemingly “incentivise” banks to favour greener loans and investments. As I mentioned previously,  4/6  the Committee will not pursue such an approach, but will rather be led by its mandate. Accordingly, we will be focused solely on the risk profile of different asset classes when it comes to climate change. To the extent that there is clear and rigorous empirical analysis pointing to different climate risk profiles across different asset classes, the Committee will then consider whether additional regulatory measures are warranted to mitigate such risks. More generally, there are a lot of ongoing initiatives globally, and we are acutely aware of the potential fragmentation when it comes to different supervisory and regulatory initiatives, which in turn would undermine the global level-playing field. As such, it is crucial that there is broad agreement among the larger set of global public and private-sector bodies when it comes to issues such as consistent definitions, taxonomies and approaches. These are crucial prerequisites to any subsequent disclosure, supervisory or regulatory initiatives pursued by the Committee. Therefore, it is extremely important to maintain global coordination and seek global measures where relevant. Stress testing as a silver bullet?
Going forward, the strategic location of Thailand and regional trend towards more economic integration provides an opportunity for Thailand in terms of market reach. We are located in the centre of ASEAN, with a combined population of more than 600 million, a large proportion who are of middle income and have potential to spend on goods and services. We are also to enter the ASEAN economic community, a regional agreement to liberalize and integrate trade in 2015 which would further develop trade prospects. Economic integration with CLMV countries will open up the opportunity to tap into a rapidly-growing consumer market as well as the regional workforce. Thailand is well known as a high performance production base in the region, especially for automobiles, food and petrochemicals. Meanwhile, the CLMV countries have a young and abundant labor force. Thus Thailand can benefit from a production supply chain that makes use of the CLMV resources for more efficient production to support businesses at home. Seeing these chances, the government has given priority to infrastructure by endorsing investment plans, especially in railways and roads, to reduce transportation costs, and setting up Special Economic Zones at five locations along our border to reap the benefit from our strategic location as a gateway to other ASEAN countries. On the side of the Bank of Thailand, we facilitate the ease of doing business through the Capital Account Liberalization Master Plan so that businesses can benefit from this opportunity.

It is vital that the commitments made to achieving balanced budgets by 200304 be firmly followed up in the Member States concerned. A continuation along the path of fiscal consolidation is essential, as is vigilance in ensuring strict adherence to the medium-term plans and rigorous implementation of the procedures of the Stability and Growth Pact. Equally, the expected recovery should be seen as an ideal opportunity to strengthen efforts towards implementing comprehensive structural reforms – in public expenditure and revenues and product, labour and financial markets. Heads of State and Government confirmed this objective during their recent meeting in Barcelona. If implemented vigorously, such reforms could increase the growth of real GDP and employment on a sustainable basis. Past improvements in the functioning of markets, together with wage moderation, have contributed to strong employment growth and a considerable reduction in unemployment. It is therefore clearly in the interest of all countries to continue to rigorously implement the agenda agreed in Lisbon and recently confirmed in Barcelona. We are now at your disposal for questions. 2  BIS Review 22/2002
In fact, during the stage when structural imbalances were building up on bank balance sheets, institutions never failed to comply with the solvency requirements. A significant part of the response to the crisis has been based on regulatory changes to correct the design of the capital framework. However, apart from this traditional micro response, the introduction of the macroprudential viewpoint in supervision has been a notable development. The purpose of this perspective is to contribute to the correction of macrofinancial imbalances and improve control over the credit cycle, which should result in more stable and sustainable economic growth. A necessary condition to be able to develop this function is the early identification of macroeconomic imbalances and analysis of the interconnections between individual institutions and markets. As we all know, the Banco de España has been performing these tasks of identifying and monitoring financial system vulnerabilities since 2014 and, moreover, has the option of introducing countercyclical capital buffers. Consequently, one might ask what changes have recently been made to Spanish law and why they are relevant. First, a royal decree setting up a macroprudential authority in Spain was finally approved on 1 March. This needed to be done as Spain was the only EU country, apart from Italy, that had still not established such an authority.

Moreover, it sets limits on the remuneration policy applicable to staff who assess  6/15  solvency and sell mortgages and, lastly, requires such staff to have a minimum level of knowledge. I would like to underline that the new law, which protects customers by ensuring that (i) they are fully informed in a timely way by trained staff, (ii) the contractual clauses applied are clear and comprehensible, (iii) the product is genuinely adapted to the customer’s needs and (iv) there are no hidden charges, is precisely helping to ensure legal certainty and significantly reducing litigation risks, which, as I mentioned earlier, entail costs which ultimately make loans more expensive for the customer. I believe that customer protection, far from hindering the business and profitability of banks, is central to a banking business model that is viable and sustainable in the long term. Evidently, in economic terms, the cost of litigation and its very negative impact on the reputation of the entire sector, far exceed any hypothetical profit that individual banks might have obtained through highly dubious practices. On the other hand, it must be stressed that only through ethical conduct towards their customers can banks recover, in the medium term, their reputation and their customers’ trust, an essential asset that takes much effort and time to build up and which, unfortunately, can be lost in no time. Against this background, it is important to point out that there needs to be a cultural change in the way banks relate to their customers.
What this entails is that if the inflation rate 1-2 years ahead is expected to be below the 2 per cent target, the repo rate will usually be lowered, and vice versa. However, it is important to point out that this rule cannot be applied mechanically and nor has this been the case earlier. It is also important to emphasise that openness regarding our forecasts is a vital part of the monetary policy reasoning, as it enables discussion and assessment of our decisions. I will return to this issue later. Monetary policy therefore focuses on expected future inflation and not the most recent CPI outcome. However, new results can of course affect the assessment of future events. The current economic situation is very important in that it comprises the foundation for our forecasting work and therefore affects the conclusions we will reach regarding future inflation. Nevertheless, we cannot use monetary policy measures to influence economic conditions in the very short term, unless we are prepared to make drastic changes in the interest rate. The Riksbank’s views on inflation prospects are described in detail four times a year in our Inflation Reports. In connection with the publication of two of these reports there is also a public hearing of the Riksbank Governor in parliament by the Riksdag Committee on Finance. The initiative to these meetings came from the Riksbank, as a way of creating further clarity and transparency with regard to monetary policy.

A press release is published after each interest rate decision, containing a brief description of the background to the decision. A more detailed account of our discussion and the motivation for the decision can be obtained from the minutes of the monetary policy meetings, which are usually published approximately two weeks after the meetings. BIS Review 7/2004  1  Growth expectations appear to be correct Our monetary policy decisions are thus based on the forecast of inflation 1-2 years ahead. The assessment of inflation prospects begins with an analysis of developments in the real economy. This has not been an easy task in recent years and the Riksbank, in common with many other analysts, has been forced to reconsider its forecasts of economic growth on a number of occasions. Sweden, like most other countries, was affected by the economic slowdown in 2001. The slowdown was aggravated by the uncertainty following the terrorist attacks on 11 September. Growth in Sweden and in the OECD as a whole was then around 1 per cent. Economic policy was made more expansionary in many countries and at the beginning of 2002 there were signs that uncertainty had declined and that economic activity was about to improve. Growth improved slightly and assessments of future growth assumed that economic activity would continue to strengthen. However, these expectations were not met. During the second half of 2002 economic prospects took a downturn once again, growth forecasts began to be adjusted downwards and the time for the economic upturn was postponed further.