samchain/econo-pairs-v1 huggingface dataset:
The financial sectors of the new Accession Countries have undergone huge and substantial reforms over last 13 years. When communism collapsed, there were no traces of a market economy, no free and legal entrepreneurial economic activity, and no institutions necessary for the functioning of a market economy. If we look at the transition economies - which represent 8 out of 10 acceding countries - today, we see a completely different picture. The basic institutions are in place and running (though sometimes slowly and not always predictably). The private part of the economy flourishes and is the symbol of a new and well functioning economy. How did this happen? And what happened to the financial sector? And what will be the impact of the accession to the EU on the financial sector, which in the accession countries is synonymous with the banking sector. In 1990, the average starting point for reforms in the former socialist countries, the situation in the financial sector was bleak. There were no services aside from basic banking and insurance functions. The banking sector was comprised of few specialized institutions, each of them a monopoly in its own area [one institution had monopoly on collecting deposits from the public, another institution provided all the foreign trade financing, and yet another institution was allowed to open accounts for individuals with foreign exchange incomes].

Banks were an exception to this, and in different countries, the approach to privatization of banks varied. In the Czech Republic, the privatization of banks had been delayed for several years due to the government’s belief that privatized banks would stop providing soft loans to strategically important firms. This fear was underlined by the experience with foreign banks that were entering the market since 1992 and cherrypicking their clients. After several years, the bad debt burden on banks’ balance sheets reached such a scale that government had to step in. Most of the debt ended up with a special governmental agency and the losses are being paid from the state budget. The cost of the bank clean-up in the Czech Republic is estimated at approximately 21% of GDP. In some other countries [Hungary, Poland], the privatization of banks proceeded quicker and the fiscal costs were substantially smaller [est. 6% for Poland, 13% for Hungary; in Szapáry, National Bank of Hungary, 2001]. Given what I have just described, the financial sector in the accession countries is nowadays in remarkably good shape. The banking sector is sound and stable, the role of non-banking intermediation is growing, and clients have access to most of the products and services they have in the EU countries.
In the Bank study, each participant was asked to play a simple, computer based, monetary policy game sixteen times: four rounds as individual policy makers, followed by eight rounds in a committee of five players, and finally a further four rounds as individuals. The committee stages were divided into two parts: four rounds where committee members were not allowed to discuss their decisions although they could observe the unattributed votes of other players - and a further four rounds where discussion was permitted. As a control for learning, the order of the ‘discussion’ and ‘no discussion’ set of games was randomised across the committees. 1  Fry, M, Julius, D, Mahadeva, L, Roger, S and Sterne, G (1999),“Key issues in the choice of monetary policy framework”, in Mahadeva, L and Sterne, G (eds. ), Monetary frameworks in a global context, Routledge  2  Blinder, A S and Morgan, J (2000), “Are two heads better than one: an experimental analysis of group vs individual decision making”, NBER Working Paper, No. 7909, September  3  Lombardelli, C, Proudman, A J and Talbot, J I (2002), “Committees vs individuals: an experimental analysis of monetary policy decision-making”, Bank of England Working Paper (forthcoming)  2  BIS Review 34/2002  Each game consisted of ten periods of play in each of which the individual or committee had to decide what interest rate to set in response to the data for output and inflation generated in the previous period.

In the OECD countries, especially in the US, there is solid growth with low inflation, BIS Review 112/1997  -4-  while we are seeing signs of broad-based recovery in Europe. Only in Asia have we seen a slowing of growth, but the growth rates have still been high by world standard and last year Japan grew by 3.6%, the fastest since the late 1980s. 15. Second, because of high global liquidity and low inflation, asset markets around the world are at record levels. Capital flows have increased with globalization, and added to record high stock and bond prices. The fact that Europe has recently raised interest rates, and the Fed is considering whether to pre-emptively raise rates to prevent wage-push inflation, has made the financial markets much more nervous despite the growth environment. This explains why the financial volatility in Asia has become global in nature. It is very flattering to know that Hong Kong can move even the mighty US and European markets, as much as the other way around. 16. Third, Asian fundamentals, and especially Hong Kong fundamentals, are strong. But there have been different degrees of strength in Asia with respect to the fundamentals. The adjustments in exchange rates of currencies in this region reflect partly the market perception of fundamentals. But as I said recently at the Per Jacobsson lecture, there is no perfect exchange rate regime.
And if I add that beautiful and sunny Malta became an increasingly popular holiday destination among Romanian tourists, I think I have touched on each of the 27 current EU Member States besides Romania. Let me conclude by saying that Romania is fully committed to the united Europe and to European values, but this is nothing new and is also the case with the other Member States. The need for unity of Europe is better perceived from its Eastern border, on the Black Sea coast, as we are so close to Crimea. And I want to make a call for unity in Europe and to stress that it is us who, through our decisions, shape its future. As Abraham Lincoln once said, “The best way to predict your future is to create it”. With this in mind, allow me to make a toast for a strong and united Europe. Thank you for your attention! 3/3  BIS central bankers' speeches

The key policy has been the implementation of financial sector reform which has resulted in a much improved financial system, especially the banking sector. Policies have also been directed at developing the region’s capital markets, especially the bond market. And as I noted, policy cooperation has also been strengthened to support regional financial integration. But while policies have been important, financial integration in East Asia has essentially been left to the market, in the sense that the process is basically a market-driven one. My view is that, going forward, the process of integration should continue to be market-driven and not policy-driven. But policy can do more by focusing on developing robust, efficient, and resilient local markets. This is because well-developed local markets will make the process of regional financial integration much easier. As for policy cooperation, there are definitely areas that government policies can do more collectively, especially on issues that involve efforts on a region-wide basis. In this context, future efforts at policy cooperation should focus on few but concrete and specific issues to be addressed or projects to be executed. A case in point is the development of a shared regional financial infrastructure such as linking the clearing and settlement systems, harmonizing regulations on cross-border investment flows, and developing a shared facility to promote greater flows of investment information. This type of specific efforts and projects would be easier to win region-wide commitment and support.
When MAS was set up in 1971 and the then-Minister for Finance Mr Hon Sui Sen became its first Chairman, the World Bank was horrified. They said it was like asking the cat to look after the fish! The track record shows that the cat has been exceedingly well behaved. In last 40 years, government has consistently backed MAS. Never has the government pressured MAS to: ease monetary policy; or give a license to a bank that MAS was not inclined to admit; or refrain from taking action against a financial institution that did not behave. Next, we thank our partners in the financial industry 14. Managing risk is an exercise in partnership. MAS will never know what all the risks are and where they are, as well as the institutions themselves. That is why the boards and management of our financial institutions must be at the forefront of keeping their own institutions safe and sound. That our financial sector has remained so is testimony to our partnership with them in prudent risk management. 15. Our financial industry has been an active partner in crafting regulation. MAS places much importance on consulting the industry before setting new rules or standards. We thank the industry for giving us useful suggestions and feedback, and sensitising us to unintended consequences. And our financial institutions have been a great ally in our efforts to promote Singapore as an international financial centre. 16. The 2008 global financial crisis has given the financial industry a bad name.

The mandates of central banks are changing, as they are strengthening their macro-prudential powers and embracing more explicitly the objective of financial stability. Some major central banks have for the first time assumed the direct supervision of credit institutions. Thus, this period of changes is going to be a landmark in the history of central banking. The current overhaul of banking regulations globally is also fundamental by nature. The scale of reforms in the regulatory framework for the banking industry, after the collapse of Lehman Brothers and the outbreak of the euro area sovereign debt crisis, could be compared only with the major reforms undertaken in the aftermath of the Great Depression in the 1930s. The sheer magnitude of this changeover, however, does not guarantee the elimination, once and for all, of the regulatory gaps and loopholes for the risk taking activities of banks. Moreover, while the wide-ranging changes in banking regulation certainly improve banks’ capital, liquidity, operations and governance, they are sometimes feared to have a discouraging effect on banks’ lending and other services in the public interest. What caused the recent wave of banking reforms, what issues regulators still need to consider, and how are banks expected to respond on a global or national level?
Eddie Yue: Hong Kong’s possible role in Islamic finance Welcome address by Mr Eddie Yue, Deputy Chief Executive of the Hong Kong Monetary Authority and Executive Board Chairman of the Treasury Markets Association, at the Hong Kong Showcase on Islamic Finance, Dubai and Amman, 11-12 May 2008. *  *  *  Ladies and gentleman, It is with great pleasure that I welcome you all to the Hong Kong Showcase on Islamic Finance, presented by members of the financial services industry in Hong Kong, and jointly organised by the Hong Kong Monetary Authority, the Hong Kong Treasury Markets Association and Hong Kong Trade Development Council, which is being held over two days in Dubai, UAE and Amman, Jordan. I would first like to thank Her Majesty Queen Rania Al-Abdullah of Jordan, who is hosting the Islamic Financial Services Board’s Annual Summit, the Central Bank of Jordan, and of course the IFSB itself, for graciously agreeing to allow us to organise this event under the auspices of the Annual Summit. This forum is indeed an excellent opportunity for the regulators, industry practitioners and investors in the Gulf region and Hong Kong to share new perspectives in the rapidly expanding area of Islamic finance, which transcends national borders and is fast penetrating global financial markets. Today we will be focusing on what Hong Kong has to offer and where it fits into this changing global financial landscape.

With respect to stock prices, the S&P 500 index has recovered by more than 50 percent from the trough reached in March. But this should be put in context. The S&P 500 index is still about one-third below its recent peak in October 2007. Moreover, compared with its level ten years ago, the S&P 500 index is down by about 20 percent. The shock to household net worth seems likely to have several important implications for household behavior. The shock creates a risk that the household saving rate could increase further. For example, during the period from 1990 to 1992, the household saving rate averaged about 7 percent of disposable personal income, considerably higher than the 4.3 percent average rate during the first half of this year. If the household saving rate were to rise, then consumption would rise more slowly than income, making it more difficult for the economy to develop strong forward momentum. In addition, it seems likely that some workers will respond to the wealth shock by postponing their retirement. This suggests that the labor force participation rate may rise once labor market conditions improve. This would tend to push up the unemployment rate, all else being equal. The second force that could restrain the recovery is the fiscal outlook. The fiscal stimulus that is currently providing support to economic activity is temporary rather than permanent. This has to be the case if we are to ensure that fiscal policy is on a sustainable path over the longrun.
Estimates of these effects must however be interpreted with caution: they rely on fragile assumptions, amounting to an equivalency between the development of risky sovereign holdings and a lasting decline in global risk aversion. Before jumping to such a conclusion, one should keep in mind that if private savings had not been  5  Warnock, F. and Warnock, V. (2006) - International Capital Flows and U.S. Interest Rates, NBER working paper. 6  BIS Review 119/2007  intermediated in public balance sheets, they might as well have been invested directly in risky assets. Yet the impact of SWF investments on some small and illiquid financial markets, such as gold, commodities and real estate might be high. To the extent that SWFs attempt to hedge macroeconomic risks for their country, difficulties could arise insofar as the best existing hedging instruments may be less liquid than bonds and equities. The risk of a potentially disruptive impact on asset price dynamics should then be acknowledged for large SWFs, as underlined by the 2007 IMF Global Financial Stability Report. Investment criteria By their very nature, the criteria used for sovereign portfolio strategic asset allocation are not exclusively related to value-enhancing considerations, but may also encompass other policy objectives. Among the main non-financial criteria, ethical and environmental concerns are sometimes put forward. The Norwegian Government Pension Fund, for instance, established in 2004 its “ethical guidelines”, excluding investments in weapons production industries or polluting sectors.

Let me start by saying that Puerto Rico is not alone in facing fiscal problems like these. Governments frequently find that public sector management becomes especially challenging when their economies are undergoing major transitions of the sort that have been taking place in Puerto Rico in the last decade. In the mainland U.S., cities like New York, Washington and Philadelphia experienced major fiscal stresses as they adjusted to the transition from manufacturing to service-based economies. Those cities faced market pressures not unlike those facing the Commonwealth today, and when their leadership tackled the issues headon, the cities emerged stronger. The problems that these cities faced required the government and the private sector to work together to find solutions. In all cases that required important changes and sacrifices. This was most effective when the necessary adjustments were shared broadly rather than concentrated on a single group. In the spirit of assisting the Commonwealth in this endeavor, I want to preview how these issues appear to me, and to suggest some steps for improving fiscal outcomes on the Island. I present these ideas in order to solicit your input, based on your deeper understanding of the situation. I present them not as quick fixes – as there are no quick fixes to these fiscal situations – but as changes to financial practices that over the next several years can help to restore fiscal health to the Island. The first step would be for the Commonwealth government to reinvigorate its efforts to raise economic growth.
They are also likely to result in more business bankruptcies and fewer new firms being formed, though here the evidence is rather more positive, with liquidations rising much less during the recession than one would expect (Chart 7). Finally, as we saw in the eighties, high levels of unemployment can become entrenched if the longterm unemployed are allowed to become disconnected from the labour market. But, as Chart 4 shows, the rise in longterm unemployment has so far been modest, while the exit rate from long-term unemployment into jobs has been broadly flat. So, at the current juncture, some indicators seem to suggest a rather large margin of spare capacity, while others point to a much smaller margin. Now it may be possible partly to reconcile these apparently conflicting observations once one allows for the fact that in some businesses, especially in manufacturing, it may be possible to shut down some capacity temporarily, reactivating it at relatively low cost once conditions improve. To the extent that the survey responses relate to the immediately operable capacity, rather than potential capacity, it would be possible to have simultaneously a modest margin of spare capacity in the short run, but rather more in the long run. Even so, the generic point remains that we presently have only an imprecise idea of the margin of unused resources in the economy.

But financial institutions and policymakers could – and should – have been more alert to the vulnerabilities that were building during the years leading up to the crisis and therefore to the possibility of a major shock to the financial sector and to the economy more generally. It is somewhat analogous to seismologists trying to predict earthquakes along a fault line. It is impossible to predict the day and magnitude of a shock with any precision, but it may be possible to say something about the likelihood of an earthquake occurring within a given period from seismic measurements and indicators of latent stress. Now it might seem natural to measure the severity of a recession by the magnitude of the fall in output. Indeed, a recession is sometimes characterised in the media as being two or more consecutive quarters of falling output, with the end of the recession being marked by a return to expansion. But that is not a very useful definition, as the mere resumption of growth will still leave some plants idle and some workers unemployed. From an economic perspective, it should be the margin of unused resources in the economy – the difference between actual and potential output – that we care about. And it is also the margin of unused resources that determines how much the economy can grow during the recovery before it puts significant 3 upward pressure on inflation , the control of which is the MPC’s primary objective.
Today we are once again in a situation where such bank support authorities are being established in many parts of the world, including Sweden. We are also facing a period of poorer economic activity. But this time the situation is very different for Sweden. Experience and measures have given resilience The anxiety that has had a stranglehold on the financial markets since the end of September comes from outside this time, not from problems in the Swedish bank sector. Swedish banks have on the whole shown much more responsible credit granting, both compared with the years following credit deregulation and compared with parts of the US mortgage market. The banks have good capital buffers and can manage substantial loan losses, even if they are nevertheless affected by the general mood of distrust on the market. We are also much better equipped in many ways to meet an economic downturn than we were at the beginning of the 1990s. I am thinking here of the effects of the changeover in monetary and fiscal policy after the crisis, and the fact that we now have sound public finances and a substantial surplus on the current account. Although a small, open economy like Sweden’s is never immune to what is happening in the world economy, and particularly to an international financial crisis, we learnt a lot from the difficult years in the 1990s. This applies to the banks as well as to the supervisory authorities and the political system.

What makes this seminar unique is its focus on the perspectives of countries that are not members of the Basel Committee and particularly those of emerging market countries. Consequently, I will try to focus most of my remarks from this very relevant perspective. I would like to discuss three of the most sensitive policy questions that national banking authorities in those markets – but also elsewhere – have raised about Basel II. First, will Basel II harm the flow of capital to emerging and developing markets? Second, is Basel II appropriate for banks in those markets? And third, will Basel II lead to a deterioration in the level playing field? In my answers to these three questions, I will also highlight other related issues in the new capital framework, such as complexity and procyclicality. In some of the discussions that I have heard or read about these important issues, I have had the impression that perhaps too much attention is placed on the constraints of regulatory capital. While regulatory capital forms one of the overall constraints on banks’ activities, it is not usually the most binding constraint for the majority of individual banking decisions taken by leading institutions, which are much more affected by factors such as economic capital, the level of competition and general costs. At the same time, too little attention seems to be placed on another channel of influence of Basel II: the improvement of risk management practices fostered by the incentives and transparency enhancements contained in the new framework.