samchain/econo-pairs-v1 huggingface dataset:
Josef Bonnici: Achieving Malta’s potential growth in challenging times Address by Professor Josef Bonnici, Governor of the Central Bank of Malta, at the ifs Malta Annual Dinner of the Institute of Financial Services, Saint Julian’s, 29 November 2013. *  *  *  Hon. Minister, Excellences, Members of the Institute, Distinguished Guests First of all, I would like to thank you, Mr President, and your Committee for the opportunity to share my thoughts once again with such a distinguished audience at the ifs Malta Annual Dinner of the Institute of Financial Services. Before I do so, however, I would like to commend the ifs for its perseverance in adapting itself to the changing demands of a dynamic financial sector and its on-going commitment to excellence in the provision of financial services education. It is pleasing to hear that you had a successful year and that you are active on new initiatives to promote even higher professional standards in the financial sector. Your collaboration with other organisations is also noteworthy. The presence of representatives from the UK’s ifs University College and the European Banking & Financial Services Training Association is evidence of the quality of the service provided by ifs Malta. Mr President, well done and I wish you and your Committee success in your future endeavours. The ECB plays an important role in averting risks As you are all aware, many of the Member States of the euro area are going through fundamental reforms that would over time promote sustainable growth.

The global economic recovery might also be delayed reaching the region, increasing the likelihood that the crisis may cause more persistent economic effects. Despite this difficult situation, remittances have proven pandemic-proof1 and have behaved countercyclically in most of the region’s countries, assuming a more important role as a source of external financing. This subject is crucial to Spain, since it is the second-ranked issuer country of remittances to Latin America. Some of the topics we will address today (such as the growing importance of digital money remittances, the role of fiscal stimulus measures in the resilience of remittances and the function of the informal economy) are key to understanding the behaviour of the flow of remittances in this crisis. Undoubtedly, today’s event will allow us to better understand these developments and – I hope – 1/2  BIS central bankers' speeches  to draw some useful conclusions on how to tackle them from the central bank standpoint. Thank you for your attention. Remittances barely fell by 1.6% in 2020, compared with their 4.8% decline during the 2008 financial crisis. 2/2  BIS central bankers' speeches
BIS Review 52/2008  5  Within the next couple of weeks, the banks will report their results for the first quarter of 2008. I have no information on what they will show. I can only say that the strong performance of their core business in the last quarter of 2007 allows one to anticipate a relatively good performance also in the first quarter of this year. In addition, given the composition of their balance sheet, they will all have profited from the depreciation of the Icelandic króna in the first quarter of the year as well as from the increase in the rate of inflation as they hold more price indexed assets on their balance sheet than indexed debt. You are of course familiar with the regulatory and supervisory framework in Iceland. It is based on best international practice and has received high marks from foreign observers. The Supervisory Authority and the Central Bank cooperate closely on their respective roles in the area of financial stability. Developments over the last few months have increased the intensity of the cooperation and monitoring of developments in the institutions’ respective fields of responsibility and experience. This is as it should be and in line what has been done elsewhere. Like many other central banks, the Central Bank of Iceland has somewhat relaxed its rules on eligible collaterals under its regular liquidity facilities. These are broadly based on ECB rules, but ours are probably still somewhat more restrictive than the ECB’s.

BIS Review 52/2008  In their expansion, the banks exploited the particularly favourable opportunities offered in the global financial markets in the form of abundant liquidity at historically very low prices. Thus, they relied on capital markets funding for their operations, raising the share of borrowed funds on the liability side of the balance sheet. The rapid expansion of the banks did not go unnoticed. It drew the attention of many observers at the end of 2005 and the early part of 2006, resulting in considerable headwind for the banks in that period. Questions were raised about their business model, their reliance on wholesale funding in international markets and low level of deposits, lack of transparency and cross ownership among other things. The banks responded effectively to the criticism levelled at them. They increased transparency, reduced cross ownership, and placed emphasis on raising the share of deposit on their funding side. They also significantly strengthened their capital base and last but not least greatly improved their liquidity position. As a result they were much better prepared for the sudden change in global financial conditions after the middle of last year. Most importantly, they had a strong liquidity cushion. The Icelandic banks have been the focus of considerable international attention in recent months. Questions have been raised about their viability and those have been reflected in their extraordinarily high CDS spreads since late last year.
The labour market figures for the past two quarters offer positive signs. They indicate that the pace of job destruction has been curbed along with a fall of 1 pp in the unemployment rate,  2  BIS central bankers’ speeches  which still stands at slightly over 26% of the labour force. The greater momentum of hiring habitually seen in the summer months and the decline in the labour force have influenced these developments; but they no doubt also reflect a favourable reaction by employment to the adjustment under way in labour costs. As the Banco de España has previously indicated and reiterated just a few days ago, evaluating the results of the labour reform approved last year requires prudence for two key reasons: it is a structural reform, whose effects, in any event, can only be felt in the medium and long term; and it was implemented amid a full-blown recession. That said, the analysis that can now be conducted shows better results – a lower fall in employment and greater wage restraint – than those indicated by forecasting models. As previously stated in other parliamentary appearances, I believe the reform was vital, that it has been correctly oriented and, most essentially, that practically all experts and international organisations had been stressing its necessity for several years. I believe its effects will be positive and that this will be clearly perceived once activity begins to pick up.

My point is that, in addition to analysing vulnerabilities in individual countries and general macroeconomic linkages between countries, you also need to look in particular at the major cross-border financial groups and financial infrastructure. The good news is that these are not so many, after all. Of the approximately 8,300 credit institutions in the EU, only nine are defined as truly pan-European and less than fifty have cross-border establishments in more than two countries. When assessing preconditions, regulation and supervision you need to look not merely at individual countries but also at whether there are major differences or gaps in the application between countries or between financial sub-sectors and if this might lead to vulnerabilities, in particular in a crisis situation. As we all know, a common European approach to bank problem resolution has so far not been developed. In a potential or actual crisis situation, we may face “the prisoners’ dilemma” in which the optimal solution may not be achieved since each country would tend first to look to its self-interest. Hence, it is important for a regional FSAP to identify vulnerabilities stemming from potential conflicts between home and host countries in the resolution of a failed financial group, which for instance might have systemic importance in the host country but not in the home country. The common thread in all this is that an FSAP should focus on two things: The weak spots as well as the channels for contagion of weakness. This is what the IMF is doing in its single-country FSAPs.
Balance of payments and tourism Our balance of payments performance in the past three years has been very favourable: from running a heavy deficit, with a negative current account balance up to 10% of GDP in 2007, we are now in a different position, with few, but brief precedents in Spanish economic history, marked by a current account surplus against a background of significant GDP growth and job creation. In the first nine months of this year (the figures for September were published today), the Spanish economy’s net lending (i.e. the cumulative surplus on the current account balance and the capital account balance) stood at € billion, compared with a surplus of € billion in the same period of 2014; that is to say, it has more than doubled thanks to the reduction in net foreign interest payments. The widening of the surplus on capital account and the increase in the positive balance on goods and services, as a result of the improvement in the energy balance and, to a lesser extent, in the surplus on non-tourist services, were also a contributing factor. 2  BIS central bankers’ speeches  The tourism balance has contributed positively to the improvement in the current account balance. In the January-September period, the tourism surplus was € billion, a very similar figure to that recorded in the same period in 2014.

In the first line of defense, operational risk management is conducted by staff in the front line units with support from first-line’s centralized risk management resources (usually as part of a business’ shared services function). The first line is responsible and accountable for the identification, analysis, management, and monitoring of the operational risks that arise as a result of its activities. Second line operational risk management is led by the Central Operational Risk Function in the Risk Group. Central Operational Risk provides independent assessment and oversight of first-line operational risks and risk management practices and is responsible for maintaining and enhancing the Bank’s operational risk framework. Our third line, Internal Audit, assesses the design and implementation of the operational risk framework and provides feedback on risk issues as an observer on governance committees. The foundations of the Bank’s operational risk program are the risk event reporting process and the risk and control self-assessment process. These processes are central to risk identification, analysis, and response. The risk event reporting process involves real-time collection, classification, analysis, and escalation of operational risk events including establishment of root causes and determination of remediation plans. You are all likely familiar with reporting risk events that have impacted your institution and categorizing them as low, moderate or significant. We do this as well. In addition, we require reporting of near miss events, which is when a control failure has occurred but we’ve been fortunate that there was no impact to the Bank.
Christian Noyer: Economic and financial crisis – the post-G20 outlook Speech by Mr Christian Noyer, Governor of the Bank of France, at a luncheon organised by the Hong Kong General Chamber of Commerce, Hong Kong, 11 June 2009. *  *  *  Ladies and Gentlemen, It is a great pleasure for me to speak to you today. At a time when the regulation of the financial and banking sectors is being discussed in-depth, this meeting is a unique opportunity for exchanging our ideas and thoughts on the most topical issues. I would like to raise three questions that seem absolutely essential today, a couple of weeks after the G20 summit and the Spring meetings of the IMF. These three questions are the following: •  What is the economic and financial outlook? •  What type of financial regulatory framework are we moving towards? •  How can we strengthen financial stability at the international level? What is the economic and financial outlook? After the recession that has been affecting the world economy since September 2008, the first signs of a recovery are being examined very closely. While in the first quarter output data confirmed a further decline at a similar or stronger pace than by end-2008, survey indicators point to deceleration of the slowdown in the second quarter, which justifies cautious optimism. Indeed, I see several reasons for hoping that “the worst is behind us”.

In this country hedge funds are obliged to register. Previously, the hedge funds reported all their holdings to Finansinspektionen, the Swedish Financial Supervisory Authority, which then published the positions with a three-month time lag. But since hedge funds often have very complicated strategies this public information became far too detailed and difficult to process. Neither was it particularly meaningful. Instead they have now gone over to regularly reporting different measures that describe the risk in the hedge funds. This is a more transparent means of gaining information about individual hedge funds’ risk. This information does not however show how large, direct or indirect, exposures the hedge funds have to the banks, for example. Information about this must come from the banks themselves and the risk must also be managed by the banks. At present we know that these exposures in the Swedish banks are extremely limited. 7 The uncertainty remains To summarise: On the whole the hedge funds have recovered rapidly from the August downturn which hit a number of different strategies. And it does not seem as though the hedge funds have played a decisive role in the most recent turmoil – not a negative role anyway. The hedge funds have functioned roughly as one could expect. In the Riksbank’s view, nothing has occurred that speaks for further regulation. However it is important that good market discipline can be maintained and that hedge funds in other countries are as transparent as the Swedish ones.
Looking at the post-war period, whenever the unemployment rate has increased by more than 0.3 to 0.4 percentage points, the economy has always ended up in a full-blown recession with the unemployment rate rising by at least 1.9 percentage points. This is an outcome to avoid, especially given that in an economic downturn the last to be hired are often the first to be fired. The goal is the maximum sustainable level of employment – in other words, the most job opportunities for the most people over the long run. Some of you may be wondering whether the risk of a recession isn’t already quite high? And, if so, doesn’t this imply a need for special care in adjusting monetary policy? After all, the current economic expansion is more than six years old – a bit long in the tooth by post-war standards. Even so, recession risk did not play a major factor in my thinking. Economic expansions don’t simply die of old age. They primarily end either because monetary policy is kept too loose for too long, thereby necessitating a subsequent sharp tightening in monetary policy to prevent a significant inflation overshoot, or because some large adverse shock hits the economy that the central bank cannot easily offset. Mitigating the first risk of being forced to choke off the expansion argues for getting started with policy normalization now rather than holding off. With respect to the second risk of unanticipated shocks, this is obviously very difficult for the central bank to insulate the economy from.

In contrast, if the economy lacked forward momentum and the risks of a return to the zero lower bound were judged to be considerably higher, I would want to continue reinvestment until the federal funds rate was higher. Consistent with the general principles I mentioned before, the evolution of the overall monetary policy stance – both interest rate decisions and balance sheet developments – should be data dependent. In my view, good monetary policy-making requires ongoing assessment and judgment, not the adherence to mechanical rules. I know market participants desire certainty, but in the uncertain world in which we live, that desire is not consistent with the policy that would best achieve our objectives. We will strive to communicate as clearly as we can so you can think along with us and alter your expectations just as we do in response to incoming information. Thank you for kind attention. I would be happy to take a few questions. BIS central bankers’ speeches  7
51  17  All speeches are available online at www.bankofengland.co.uk/speeches  17  These extraordinary monetary policy measures have been an important factor supporting growth in the UK since the global financial crisis. Without these measures, we estimate the economy would have been around 53  8% smaller and unemployment 4 percentage points higher. Highly accommodative monetary conditions  have helped maintain UK growth at steady, if unspectacular, rates for the past six years. Recent data suggest UK growth continues to be steady, at or around its trend rate of roughly 1.5% per year. At the same time, the labour market has continued to perform strongly. Almost 3 million new jobs have been created over the past six years. The unemployment rate in the UK, at 4.2%, has fallen to its lowest levels in over 40 years. Measures of tightness in the labour market have picked up notably. And the Bank’s estimates suggest little or no slack remains in the economy. Consistent with that, and despite undulations in shorter-run measures, we have seen a steady pick-up in annual rates of wage inflation over the past 18 months, as well as in pay settlements. Private sector regular pay growth has risen from around 2% this time last year to just shy of 3% currently. And average pay settlements of around 2% last year have picked up to around 2.5% this. Surveys of pay and recruitment difficulties, including from the Bank’s Agents, have gone up a gear comparing this year with last.

17  The UK is, in many respects, a prime example of that secular struggle in practice. The forces of secular innovation and secular stagnation are both operating powerfully, with the two productivity poles acting like magnets pulling in opposite directions. This is widening the distribution of productivity across firms and, as a by-product, contributing to a widening of the distribution of pay across workers. The tail of two companies has, as its mirror-image, a tail of two workers. Another perspective on these productivity dynamics is provided by viewing them through the lens of technological diffusion. In the fullness of time, innovation should be expected to diffuse through the economy, lifting all boats. That has been the lesson of every industrial revolution. Yet in the UK, this technological trickle-down, from frontier to tail, appears to have dried up. A lengthening flotilla of boats has remained in dry dock. The diffusion engine appears, for them, to have seized up. 18  15  Defined as the share of firms with annualised productivity growth of less than ½% between 2004 and 2014. Schneider (2018). For example, Gordon (2012) and Brynjolfsson and McAfee (2014). 18 To a lesser extent, there is some evidence of the same being true internationally (Berlingieri et al (2017)). 16 17  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Empirical evidence, using international innovation indices, supports this diagnosis. Despite ranking th  19  consistently in the top-5 for innovation, the UK ranks only 38 globally for knowledge diffusion.
In this regard it is helpful that in a monetary union the parameters within which action can be taken are defined in the sense that the interest rate and the exchange rate instruments are not available to governments, and fiscal policy can only be used for adjustment purposes within the limits set by the Stability and Growth Pact. Given the limited room for manoeuvre, therefore, any adjustments necessary in order for the Maltese economy to achieve the growth rates that will ensure a more rapid pace of convergence and to respond successfully to asymmetric shocks will have to take place in the real economy. And since in a resource-poor and open economy like Malta’s, growth must be predominantly export-led, the focus of policy must be on increasing the country’s international competitiveness. The starting position for addressing this challenge is relatively favourable. In the words of the Commission’s Convergence Report, Malta has achieved a high degree of sustainable convergence; and more recently, the IMF Article IV Mission Report concluded that The economic recovery is gaining traction, owing largely to cyclical strength and some structural change. The economy has indeed been growing at more than 3% for almost three years and broad-based reforms have helped to mitigate structural impediments in a number of areas.

It is, therefore, appropriate on this occasion to acknowledge the valuable work carried out by the National Euro Changeover Committee and its Steering Committee. I would also like to pay tribute to the staff of the Central Bank of Malta for their contribution in preparing the Bank for its role as a member of the Eurosystem and in planning and executing the currency changeover. During more than two millennia the Maltese people have used many different currencies in circumstances often dictated by the changing balance of power in the Mediterranean, and reflective of Malta’s status as a dependency of some larger and more powerful nation. The adoption of the euro, however, is a change of currency with a difference. This time it will occur because Malta, out of its own choice, will join fourteen other sovereign Member States of the EU in an economic and monetary union designed to complement the Single European Market, a venture that could rightly be described as an epoch-making development in the history of our continent. Since Malta joined the EU in 2004, and particularly since the Maltese lira entered ERM II in 2005, the Central Bank of Malta has been making the case for an early adoption of the euro. And for good reason.