samchain/econo-pairs-v1 huggingface dataset:
ASEAN is becoming increasingly integrated so that its market will be at least half as big as China's and India's. ASEAN made a fundamental strategic choice to form the ASEAN Economic Community (AEC) by 2020. It is also formulating an ASEAN Charter, a visionary document that will chart its future direction. 29. In addition, ASEAN is positioning itself to ride on the growth of China and India. ASEAN's total trade with China and India has grown significantly over the past decade, and in 2004 amounted to $ billion and $ billion respectively. 30. ASEAN is working hard to ensure that its Free Trade Agreements (FTAs) with China and India are completed and fully implemented by 2010 and 2011 respectively. Besides China and India, ASEAN is also negotiating FTAs with other major economies like Japan, South Korea, Australia and New Zealand. BIS Review 83/2005  3  Japan's role and response 31. In the past decades, Japan has led the growth of China, South Korea and many other countries in the region in a 'flying geese' formation. Japan has been an important source of investments, capital and technology, and a major export market for many Asian countries. After a decade of stagnation, Japan is firmly back on the path of healthy sustained growth. Prime Minister Junichiro Koizumi's leadership and overwhelming victory in the recent election give cause for hope that his reforms will be sustained. As the second largest economy in the world, Japan will remain an important global player. 32.

The problem, of course, is one of terms: the long-term business sustainability objective clashes with other short-term objectives, in particular the search for swift profit, under the pressure occasionally of shareholders. Changes in bank regulation, management and supervision Keynes once criticised those unprofessional bankers who imitate the short-term strategies of their rivals only to hide behind the behaviour of the sector as a whole as justification for their own mistaken decisions.2 Unfortunately, the crisis suggests Keynes may have been right. Though not so in all instances, the search for short-term profit may lead to the pursuit of risky strategies, despite the fact that this may compromise the bank’s future in the medium and long term. We have also seen that, if a large number of banks coincides in a mistaken strategy, entailing future problems, the problem ceases to be an individual one and become systemic, and individual responsibility is diluted. I appreciate that the question we must ask ourselves here is what we have changed in attempting to correct this type of behaviour. Or, expressed otherwise, why should this time be different? Regulatory changes Firstly, deep-seated changes have been made to the regulations applicable to banks. The biggest revolution is in the Basel capital framework, which has been reformulated in its virtual entirety so as to incorporate the lessons from the crisis. The changes are far-reaching, and describing them would alone take up the rest of my address today.
I should add that we will also expect individual financial institutions to design and implement appropriate programs for transitioning employees affected by digital disruptions, beyond compensation arrangements. Preparing society for digital finance My final point has to do with preparing society for digital finance. The consumer experience of financial services is changing dramatically. This is happening on several levels. Customer interfaces are shifting online. The basic commodity of finance – money – is being replaced by electronic forms. Financial products are offered as part of a seamless solution for customers buying property, subscribing to a mobile phone or data package, going on a holiday or enrolling in university. This in turn alters the relationships that a consumer develops, which can be several 4/5  BIS central bankers' speeches  layers removed from the entity that is ultimately providing a financial product or service. Frameworks and business practices designed to protect consumers have not fully kept up with these changes. This can increase risks to consumers – from a lack of transparency, misrepresentations, the inappropriate use of data to unfairly discriminate against consumer segments, legal loopholes, and financial fraud. Greater access to financial services itself through the entry of new and unconventional players can also contribute to overindebtedness. More needs to be done to better prepare society for digital finance.

Forecasts for a low inflation level in the period ahead have dictated the implementation of an accommodative monetary policy in the last quarters. The policy rate cuts have already been passed through to interest rates in the interbank and deposits market, and to most of government securities’ yields. Interest rates on loans have also reflected the expansionary stance of the monetary policy of the Bank of Albania, but they continue to contain high risk premiums for credit risk and other risks related to long-term investment. The slow performance of the economy is also reflected in the monetary indicators. Money supply continued to increase at low annual rates, standing at 2.1% in March. This performance has reflected the decrease in credit to the private sector and the lower financing needs of the public sector. Credit to the private sector shrank 2.4% in March. Besides the weak demand from businesses and households, the sluggish performance of credit reflects the banks’ conservative lending policies. This approach is reflected not only in the interest rates on loans, but also in other lending standards applied by the banking system. In this regard, the Bank of Albania deems that the banking system in Albania has room for and should adopt a more appropriate behaviour towards crediting the Albanian economy. The country’s economic and financial reality, on-going monetary policy easing and our liquidity-injection operations, as well as the adaptation of our regulations to the market situation provide the premises for faster crediting to the economy.
Supervisors and global market participants face significant hurdles in exercising discipline on an entity whose operations span more than one jurisdiction. Business practices differ between countries. Legal systems may be unfamiliar. Deciphering balance sheets prepared under national accounting systems can be an extremely taxing undertaking. Considering those burdens alone, it is easy to agree that supervisory and market discipline would be more effective under more harmonious - if not completely harmonised - accounting rules. But the task is formidable. In our duty to safeguard and reinforce financial stability, central banks and financial supervisors have a legitimate interest in the quality of accounting standards and their effective implementation. We believe that in order to help fortify the financial system, accounting standards should support - or at least be consistent with - sound risk management and control practices in use in the industry. In addition, accounting standards should facilitate market discipline by providing a more transparent “window” into an organisation’s financial position and performance and likewise into its measures and management of risk exposures. Finally, accounting standards should facilitate the effective supervision of financial institutions. In the specific case of the insurance industry, I think it’s fair to say that almost all of us believe that, for international standards to be complete, we need a single, high quality standard developed to address insurance liabilities.

This has been driven by a whole host of things, including improved technology and deregulation reducing transaction costs; the unbundling of different types of risk associated with the development of derivatives; and the entry of relatively unconstrained traders, including hedge funds. One result is that in ‘vanilla’ markets it may have become more difficult for intermediaries to make positive risk-adjusted returns that exceed their cost of capital. Anecdotally at least, they make a more attractive return on, amongst other things, exotic products and via transactions tailored to address the risk-management challenges of particular clients or client types. As such, they have a powerful incentive to innovate. Over time, many of the most successful innovations become mainstream, enhancing market efficiency, helping to optimise the distribution of risk, and reducing the initial supernormal returns to the innovators, who move on to the next thing; and so on. As put, that sounds like a benign story for society. And, by and large, I think it is. It does, though, have at least two corollaries. First, investors – whether in funds or firms – should occasionally ask themselves whether they can safely extrapolate into the future the returns that they have earned in the past. Second, investment bank innovators may from time to time face a challenge in keeping the industry’s controls up to speed with what, ex post, turn out to be their most successful innovations. Imagine that, at any particular time, a firm has a portfolio of many innovations. Some will succeed, some won’t.
Jaime Caruana: Latest progress on Basel II Inaugural address by Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the 5th Annual Risk Management Convention of the Global Association of Risk Professionals, New York, 24 February 2004. *  *  *  Introduction I would like to thank the organisers for inviting the Basel Committee to participate in GARP’s Risk Management Convention. Last year, you were kind enough to welcome as a keynote speaker Bill McDonough, the former President of the Federal Reserve Bank of New York and then the chairman of the Basel Committee. Today I am honoured to represent the Committee as Bill’s successor. The agenda for this week’s program demonstrates just how important and tough the job of a risk manager has become. Risk is no stranger to any business, and good business people have long sought ways to control their exposures to risk. Yet advances in technology and marketplace practices have sharpened our sense of the risks we face and of their potential costs should we fail to manage them. In recent years, for example, bankers have adopted an ever-widening array of databases, analytical tools, and sophisticated software packages to lend quantitative insight into risks that were once assessed mainly subjectively. Impressive advances have been achieved in measuring and managing exposures to market risk, credit risk and, more recently, operational risk.

With regard to this last point, the Committee has decided that the amount of excess provisions that can be included in Tier 2 capital will be limited to a certain percentage of a bank’s risk-weighted assets, which is still to be determined. This change represents a major improvement that will go a long way toward ensuring that a bank’s capital will adequately protect it against unexpected losses and that it will provide incentives to sound provisioning. I am also pleased to note that the early reactions to these changes have been positive. Securitisation The second note published in January addressed changes to the treatment of securitisation exposures. We are particularly committed to developing an appropriate and balanced treatment for banks’ exposures to securitisations since the 1988 Accord does not address this important risk management tool. At the same time, a securitisation transaction can result in an extremely intricate structure, which makes it hard to specify a simple rule. Public comments on our proposals acknowledged this challenge, as many found the proposed capital rules in the third consultative paper for securitisations to be among the most complicated parts of the New Basel Accord. Many also thought the treatment to be perhaps too conservative. In response, members of the Committee pledged in Madrid to streamline the relevant proposals. Equally important, we wanted to adopt, where possible, requirements that are more compatible with the best practices in use today. The note released in January illustrates the progress we’ve made.
We might view the entire three-pillar structure of Basel II as a series of built-in reality checks for management’s decision-making. In this regard, the three pillars of Basel II are intended to make sure that management assesses and controls its risks carefully and that it takes the steps necessary to allocate the appropriate capital. As you know, in the first pillar, the minimum capital requirements focus management’s attention on identifying, assessing and quantifying risk within a specified framework. This puts the onus of analysis and decision-making on the right set of shoulders: bank managers are in the best position to evaluate their risks and are ultimately responsible for responding to them. When banks consider their risks more comprehensively and work to evaluate rigorously the magnitude of losses that they may face, they are improving the quality of the information at their disposal. That, in turn, should improve their ability to arrive at sound decisions regarding the amount of capital that they may need to weather potential losses in the future. Considerable attention has been paid to some of the formulas and techniques that we have adopted in Pillar 1 to help quantify the potential for losses related to credit and operational risk exposures. We  BIS Review 66/2004  1  must remember that these formulas are not revolutionary.

In fact - in one of many examples of how Basel II seeks to reflect reality - the new framework draws on the tremendous advances that many firms have already achieved in quantifying their exposures to credit and operational risk. This reflects as well one of the Committee’s goals to build the new framework on sound risk management practices in use today and to provide sufficient flexibility for it to evolve with advances in the future. At the same time, the Committee knows that mathematical formulas and financial models are only as good as the assumptions they make. At best, therefore, they serve as supplements to our insight: they do not replace our need for expertise and judgement. Even Einstein warned of the dangers of confusing mathematical certainty with reality. He said once that, “As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality.” Reasonable supervisors and bankers know that we cannot rely purely on the apparent mathematical certainty of models and formulas to make decisions for the uncertainty of the future. Likewise, some banks may engage in unique activities that are not captured in the minimum standards. To guard against overdependence on quantitative models, we have included qualitative provisions to ensure that strong risk management and internal controls are adopted throughout the organisation and to ensure the involvement of boards and senior management. The New Accord also stresses the importance of independent assessments and audits.
In this way inflation expectations were adjusted in advance to an anticipated pattern of economic policy reactions, whereby high price and wage increases were accepted or accommodated by devaluing the krona. As a result, strong inflationary mechanisms were built into the economy. As we have seen in recent years, once such mechanisms have been established, they are difficult to change. 3. Monetary policy’s rule system Experience has shown that more is needed than proud declarations from political decision-makers that they will safeguard a stable value of money and are not prepared to adapt policy to excessively high wage increases. We heard plenty of that in the 1980s. One way of enhancing credibility that has been found to work well and is supported by economic theory is for the democratically elected body to delegate monetary policy to a central bank with a clear, specified obligation to safeguard the value of money. The central bank is given full control over the instruments, principally the short interest rate, for fulfilling the stipulated objective. This arrangement limits both the room for short-run attempts to boost employment and the risk of inflationary mechanisms taking root in the economy. That also lessens the risk of a repetition of what happened in the early 1990s when the inflation bubble burst and unemployment rose. Credibility provides greater manoeuvrability It may be worth underscoring that a system where price stability is credibly delegated to the central bank can confer greater freedom of action in economic policy.

It is generally agreed that monetary policy can be used to affect production and employment in the short run. An important reason why monetary policy is capable, at least in principle, of influencing employment in this time perspective is the existence of rigidities in price and wage formation. Suppose, for example, that low wage settlements are concluded with a certain rate of inflation in mind. If monetary policy becomes more expansionary and inflation takes off, wage costs will be lower than expected in real terms. It will pay firms better to take on additional labour and employment will rise. In the short run, then, one can expect a trade-off between inflation (or the extent to which monetary policy is expansionary) and employment (or unemployment). BIS Review 32/1997  -4-  The existence of such a short-term trade-off does not mean, however, that it will serve to raise employment permanently. This is because when actual inflation changes, economic agents (firms, employees, etc.) normally adjust their expectations of future inflation. So in the next round of wage agreements, for example, employees may demand compensation for a higher expected rate of inflation. Changing expectations mean that the trade-off between inflation and unemployment ceases to be stable. This is intuitively intelligible. If the normal rate of inflation is, say, 5 per cent, it seems reasonable that employment will rise if inflation moves up to 10 per cent because this reduces wage costs in real terms. In the figure this amounts to moving from A to B.
Despite oil prices more than tripling from the beginning of 1999 to the end of last year, inflation expectations stayed at the Riksbank’s target. If expectations also increase, monetary policy must be made considerably more stringent to expel inflationary expectations from the economy. From this point of view, it is important that monetary policy is reviewed and that a discussion takes place on the Riksbank’s actions, although the importance of the bank should not be exaggerated. Having said that to provide a perspective on the tasks we have at the Riksbank, I should like to move on to discuss the economic situation in Sweden. Favourable growth During the past three years, GDP has increased in Sweden by an average a bit more than 3.5 per cent. The rate of growth is increasingly higher than what is possible in the long term. The Swedish economy has expanded approximately a half per cent more quickly per year than the euro area in the past four years, although over one per cent more slowly than in the United States during the same period. BIS Review ? ?/2001  1  Strong foreign trade has made a positive contribution to growth in Sweden for large parts of the 1990s and since 1994, the current account has been in surplus. The weak exchange rate for the krona throughout almost the whole of this period with a floating exchange rate, combined with the vigorous growth in the telecommunications sector have been the driving forces underlying the increase in exports.

Some countries have opted for various forms of capital control, although their effectiveness needs to be evaluated based on the objective of imposing them at the first place. Some studies find that capital controls have some compositional effect and could alter the maturity of new investments. So far as reducing the volume of flows, the empirical evidence is inconclusive. Unless the authorities have full control over capital accounts, partial restrictions are unlikely to offset the impact of flows, prevent appreciation of local currency and provide more space for independent monetary policy. In principle, flow of capital from advance economies to emerging ones and appreciation of the currencies of the latter over time is a mutually beneficial secular trend, as long as it is supported by strong fundamentals, better growth prospects, and high productivity differentials. Rather than fighting against this trend through over restrictive capital controls or excessive reserve accumulation, there is strong legitimacy in using macro-prudential policies to mitigate the adverse effects of volatility in capital flows, especially those with speculative nature, over financial stability. Several emerging economies have started implementing such measures to limit the credit growth and asset price bubbles. These measures include raising reserve requirement ratios, requiring higher income- and deposit-to-loan ratios, tightening capital adequacy requirements and liquidity ratios, introducing transaction taxes, fees etc.
But the substantial stimulus from monetary policy and the lower level of sterling should ensure that the recovery continues. The impact of the fiscal consolidation may be partially mitigated if it causes businesses and households to become less uncertain about their prospects and so behave less cautiously. But the reverse is also possible. In that regard, it is perhaps notable that, following a brief revival, measures of consumer confidence have fallen back since the spring of this year. The importance of Keynes’ animal spirits has been demonstrated all too clearly by recent events. Although the recession was triggered by a financial crisis, the speed and severity of the downturn was greatly amplified by the accompanying collapse in confidence, as companies and families pulled back on spending and increased savings. More recently, the pickup in private sector spending has occurred alongside a fall in the household saving ratio and a stabilisation in company saving. 2  BIS Review 161/2010  A recent survey carried out for the Bank provides some evidence on households’ attitudes towards the fiscal tightening. 1 90% of survey respondents said that they thought the fiscal consolidation would have some impact on them. Perhaps surprisingly, a majority of these households said they had not yet taken any actions in response to the consolidation. But it’s clearly still early days in this process and there is a chance they will react more as the impact of the austerity measures increases. This is something that the MPC will continue to monitor carefully.

Full details of the survey will be made available in an article published in the 2010 Q4 Quarterly Bulletin on 13 December. 2  Those developments are also consistent with results from the Deloitte CFO surveys – the 2010 Q3 survey indicated that a majority described credit as easily available for the first time since the survey began in mid-2007. BIS Review 161/2010  3  has been maintained at £ billion. Although monetary policy has not been eased substantially further over the past year, the stance of policy remains highly stimulatory and continues to provide significant support to economic activity. The level of sterling following its substantial depreciation through 2007 and 2008 should also aid the recovery by encouraging a rebalancing of our economy towards external demand. However, at first blush, the support provided by the lower level of sterling over the past year looks distinctly underwhelming. Yes, the most recent data suggest that net trade made a positive contribution to growth in the third quarter of this year and this is encouraging. But these early estimates are noisy and prone to revision. Stepping back, net trade has detracted from growth over the past year. And within that, the growth of exports has underperformed expectations, especially when judged against the acceleration in global demand. However, the story is somewhat different if we look at the performance of goods and services exports separately. The lower level of sterling does appear to have supported goods exports, which have increased by well over 10% over the past year.