samchain/econo-pairs-v1 huggingface dataset:
The Riksbank's stability work developed after the crisis of the 1990s Almost one hundred years later, the Swedish bank crisis of the 1990s also acted as a wakeup call for the authorities. The crisis revealed several serious shortcomings, both at the banks and with regard to the authorities' preparedness. As I mentioned earlier, the risk management culture in the financial sector left much to be desired. But even authorities such as Finansinspektionen, the Ministry of Finance and the Riksbank lacked the overall view of the risks in the banking sys-tem required to predict and counteract the approaching crisis. Nor had any of these authorities been given the task of overseeing the system as a whole. After the crisis, however, it was natural that the Riksbank began to develop analyses and stress tests of risks and vulnerabilities in the banking system. Since 1997, the Financial Stability Reports have become a central part of the Riksbank's stability work and they represent an important starting point for a dialogue with the banks and other players. The Riksbank has also worked for a number of years to strengthen its prepared-ness for financial crises, for example by running crisis exercises and entering into cooperation agreements on crisis management with other authorities in both Sweden and our neighbouring countries. The Riksbank has also long contributed actively in various ways to efforts to improve financial regulation, both in Sweden and abroad.

Where, as in Malta, the performance of the financial sector hinges crucially on the fate of a small number of players and where the lack of depth and liquidity in capital markets often causes the market value of a particular debt instrument to deviate from underlying fundamentals, the risk of contagion within the system, as well as, from other systems is accentuated.3 This latter aspect might become less relevant as financial services providers in Malta and in the EU respond to the introduction of the Financial Services Action Plan and the eventual establishment of a single market in financial services. On the positive side, such initiatives provide better income-earning and liquidity management opportunities, improve the efficiency with which the sector operates and enhance its capacity to weather sector-specific shocks. On the other hand, the advent of liberalisation and heightened levels of competition could well spur service providers domiciled in Malta to take on new risks and venture into non-traditional lines of business. Furthermore, as a result of passporting rights, competition is likely to become more acute. The ensuing interdependence between different sectors and countries could well expose the domestic system to new vulnerabilities, including possible contagion from systemic shocks. This will be especially the case upon Malta’s entry in the euro area as such a move would provide further momentum to the pace of financial market integration. Moreover, the eventual linkage of the domestic payment system with TARGET will also facilitate the transmission of certain risks, not least those of an operational nature.
This clarification also makes it possible to take account of any possible measurement bias in the price index, as well as inflation differentials within the euro area;  BIS Review 113/2007  3  -  the quantitative definition of monetary stability brings the Eurosystem’s strategic framework close to that of central banks that rely on inflation targeting, especially if a broad definition of the latter is accepted, such as that expressed by the term “flexible inflation targeting”. The big difference is in the use made of forecasts derived from econometric models, which play a predominant role in “pure” inflation targeting strategies, whereas they are only one component in the decision-making process of the Governing Council of the Eurosystem;  -  especially in the early days, we were confronted with substantial criticism regarding our definition of price stability, considered by many observers as too ambitious.

Meeting these challenges has not been straightforward in recent years as the euro area economy was hit by several shocks: financial instability in the aftermath of the stock market  6  BIS Review 113/2007  collapse in 2000, exceptionally high economic and geopolitical uncertainty between 2001 and 2003, just to name a few. -  First of all, we have to identify and account for temporary “special factors” or “distortions” that may affect monetary developments and blur their information content. To some extent it is the aim of the methodology developed at the ECB which allows for periodic adjustments to measured monetary aggregates in order to account for portfolio shifts which impact the demand for money without any incidence on future inflation. This approach has met with great success in the period 2000-2004, allowing the Eurosystem to enter an easing cycle despite a rapid growth of M3. -  Second, and more permanently, it is necessary to disentangle, in monetary and credit evolutions, those which reflect structural and permanent changes from those which simply result from moves in the level of interest rates and the position in the economic cycle. -  Finally, we must be able to assess whether these developments result from money supply shocks, in which case they clearly entail some risks to price stability, or whether they are caused by money demand shocks that may raise the desired level of money balances without necessarily impacting aggregate demand.
After the wage settlement last year, we projected annual wage growth in 2002 of between 5½ and 6 per cent. Wage growth in 2002 was far higher than expected. Substantial pay increases were also agreed on for 2003. The various groups achieved very different results, increasing the risk of wage-wage spirals. The outcome of last year’s wage settlement may be an indication that the social partners considered the labour market to be very tight this spring. Annual wage growth in 2002 Projections published at different points in time. Per cent  6  6  5  5  4  4  3  3  2  2  1  1  0  0 Fe b  De c  01 Ap r0 1 Ju n 01 Au g 01 O ct 01 De c 01 Fe b 02 Ap r0 2 Ju n 02 Au g 02 O ct 02  7  00  7  Source: Norges Bank SG Gausdal 31.01.03  There is little new information about wage developments since the wage settlement last year. Agreements have been concluded awarding high pay increases to seamen and doctors. We may have underestimated the growth in salaries for white-collar workers last year, but there is also some anecdotal evidence to suggest that during the autumn large companies and law and consultancy firms tightened cost control.

Change in number of unemployed on same month previous year Total number of unemployed and long-term unemployed 25000 20000  Total  15000  Long-term  10000 5000 0 -5000 -10000 mai 01 jul 01 sep 01 nov 01 jan 02 mar 02 mai 02 jul 02 sep 02 nov 02 jan 03  Sources: Statistics Norway and the Directorate of Labour SG Gausdal 31.01.03  Growth in the Norwegian economy was sustained by a strong increase in household consumption through 2002. In line with expectations, the sharp rise in real wages fuelled particularly high consumption growth last autumn. There are now signs that the strong growth in consumption may be slowing. Household expectations are lower than earlier and expectations concerning their own financial situation have also fallen markedly. Consumer confidence indicator 45  45  30  30  Trend 15  15  0  0  -15  -15  Unadjusted -30 -30 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Sources: Norsk Gallup Institutt AS, Association of Norwegian Savings Banks SG Gausdal 31.01.03  Household borrowing is remains high and the debt burden is still on the rise. Growth in credit to households has slowed in recent months, but growth remains at a double-digit level. On the other hand, the sharp rise in house prices in recent years seems to be levelling off. This may also result in lower credit growth through the winter and spring. Credit growth by borrower sector and house prices. 12-month rise.
In terms of European cooperation, supervision will be given a new structure, based on proposals presented by the European Commission last summer. One element of this proposal is the creation of a European risk board, the European Systemic Risk Board (ESRB), in which central banks and supervisory authorities will meet to discuss exactly the kind of overall systemic risks that were overlooked in the run-up to the present crisis. Another element is the upgrading of the three supervisory committees in which all European supervisory authorities collaborate into European authorities with somewhat greater independence and more widespread authority than previously. All of this will hopefully be agreed upon by the finance ministers in December of this year, while Sweden still holds the Presidency of the EU. 2 The costs of financial crises are greater than was previously believed. The present crisis has shown that the world’s financial markets are more strongly interlinked than there has previously been reason to believe. Who would have thought that the collapse of a US  2  This issue was discussed in more depth in my speech “Towards a new European supervisory structure”, recently held at SIFMA’s Annual Meeting in New York on 27 October. investment bank would cause the entire world’s credit systems to break down? A national financial crisis can rapidly spread across the entire world if, for example, the value of certain assets starts to be brought into question and it is not known in which balance sheet these assets have been hidden.

However, experience tells us that increased interest rates are seldom enough to break the trend. Optimism can be such that investors are glad to pay the extra interest costs or to accept a correspondingly lower return on assets, as they are convinced that prices will continue to rise. For example, in Sweden in 1989, the direct yield requirement on the commercial property market lay at around 4 per cent, while a risk-free five-year government bond had a return of up to 12 per cent. So the market preferred an unsecured property asset to a covered bond with a return of 8 per cent more! No monetary policy can defeat that kind of optimism. Furthermore, it could be the case that inflation is low despite the strong economic development. If this is the case, monetary policy may need to become more expansionary to attain the inflation target, which, in turn, may fuel financial imbalances. During the years preceding the current crisis, increasing globalisation resulted in a heavy dampening of import prices, which pushed inflation down and contributed to an expansionary monetary policy in many countries. Monetary policy thus fuelled the bubble, rather than counteracting it. If a crisis becomes really serious, as is the case with the present crisis, the conditions for conducting monetary policy become very difficult. The situation became exacerbated when rising risk premiums increased the interest rates affecting households and companies. Falling inflation and inflationary expectations led real interest rates to increase even more.
The first is to share with you selected major developments in the Malaysian Islamic finance industry that signify the vast potential for continued strong growth of Islamic banking and takaful in Malaysia. I will then endeavour to provide some highlights on how Malaysia has strengthen its position as a preferred platform for global takaful and retakaful activities, within a broader aspiration for Malaysia to be one of the key international Islamic financial centres. Finally, I will present some areas in the development of global Islamic finance, including takaful and retakaful, where Malaysia can play a major role. II. Significant developments in Malaysian economy and Islamic financial industry  A decade after the Asian financial crisis, the Malaysian economy including its financial system is at its strongest position. With this growth, Malaysia has greater economic flexibility to shift to new areas of growth and thus sustain the development momentum. Economic growth has been achieved with relative price stability, low unemployment and strong external balances. The level of savings remains high at 37 percent as a percentage to the GDP while the level of external reserves remains strong at nearly USD100 billion. GDP per capita at current prices has increased to about USD 6,000 in 2006. Malaysia has also taken advantage of globalization to strengthen its economic and financial relationships with the major trading blocs across the globe. In 2006, the total value of the external trade exceeded for the first time the RM1 trillion mark. Malaysian investment abroad has also grown in strength.

Most tail companies are not zombies, overburdened by an insurmountable mountain of debt or a broken business model. Rather they are companies surviving, but not yet thriving. And they account for fully 80-90% of all jobs. They are not the tail; they are the dog. If you restricted creative destruction to true zombie – those whose productivity was negative – this would make little arithmetic difference to average productivity, raising it by perhaps 1%. 55  A more creative solution to the long tail problem would be to build a stronger diffusion infrastructure – that is to say, creating some stronger and longer diffusion spokes to attach to the UK’s strong innovation hub. Let  54 55  Schumpeter (1942). Assumes workers with negative productivity flow into firms with zero productivity. 20  All speeches are available online at www.bankofengland.co.uk/speeches  20  me discuss three approaches for creating those institutional spokes. All three are already underway, to some extent. Once in place, they could speed-up the process of technological trickle-down to the long tail. (a) Supporting Supply Chains  Recent years have seen a lengthening and deepening of supply chains, nationally and internationally. 56  The  largest UK companies have direct supply chain links with several thousand other companies, large and small, national and international. As well as benefitting efficiency and lowering costs, these supply chains provide a natural infrastructure that could be harnessed to spread good practice across companies.
Policy implications What does all of this mean for policy? While the water has not become as warm as two years ago I thought it would, I do not yet see enough evidence that we have missed some shift to a permanently colder environment. My central expectation remains that as the effects of the crisis continue to heal and as the deflationary effects of past sterling strength and oil price falls wane, domestic cost pressures will gradually push inflation back to target. I will be looking to see that consumer confidence remains robust and business intentions remain strong. I will be watching to see if pay growth picks up as disinflationary pressures fade and if productivity growth accelerates as a result of the pick-up in investment and of the tightness of the labour market. And I will be looking very carefully at the risks of another unfortunate event for the UK economy from a hard landing elsewhere in the world. If economic growth falters and pay and productivity remain stuck at current levels then the healing story will become increasingly less convincing. There are of course other possible stories one can tell about the economy and other risks. I want to mention three. The first is the possibility, much in the news two years ago, that monetary policy will not react in time to the build-up of inflationary pressure. Monetary policy typically has its peak impact on inflation somewhere between 18 and 24 months ahead.

One reassuring point is that the major UK banks and building societies were tested against precisely this scenario by the Bank of England in 2015 and demonstrated they had the resilience to weather such a shock and carry on lending to the UK economy. Conclusion Looking back over the last two years, I think that the slow healing story can still explain where we are and provide a guide to our future prospects. But the story has to be adapted in the face of more UK and world weakness than I had expected and this weakness might be signalling that there are deeper structural factors at work. Nonetheless, my central projection remains that the UK economy will continue to grow solidly and that inflation will return to target over the next few years. But, as always, policymakers need to be alive to the possible meaning of disappointments, to be very sensitive to the possibility of changing temperatures around them, and to the risk of unfortunate events. We have a range of tools at our disposal and should be ready to use them whichever risk materialises. BIS central bankers’ speeches  7
Imposing capital requirements always involves a trade-off between financial stability concerns and efficient capital allocation. In a downturn, when concern about the availability of credit may be greater than in an upturn, a temporarily reduced capital requirement may be justified. The condition must be that the buffer is built up again during the upturn. Such time variant capital requirements would also be demanding to implement, however. It would leave the relevant authority with the discretion to assess the cyclical situation and impose appropriate capital requirements. The time horizon over which the economic outlook should be assessed would have to be several years, in order to cover the full cycle. As for ways to make the economy – in Norway and in a number of other countries – more robust to asset price fluctuations, I think household incentives to borrow and invest in residential property should be reduced. Tax deduction of interest against income, combined with too low or non-existing property taxes, contribute to a high leverage ratio. Earlier, I spelled out some challenges involved in implementing macro-prudential policy measures. I did not mention the important international aspects of these issues. First, given banks’ cross-border activities, it is of particular importance to establish a level playing field and avoid competition among regulatory authorities. Lax regulation in one area would undermine everybody’s efforts to reduce systemic risk. Second, in order for the economy to benefit from attempts to make the effect of regulations less pro-cyclical, discretionary elements of the system would have to be coordinated across borders.

In all cases, an indispensable ingredient of success has been an honest acknowledgement of the problem accompanied by the genuine desire of all the social partners to work out an effective solution in the national interest. In the current circumstances, sitting on the fence is not a responsible option. Not only does it become an uncomfortable position to maintain, but it also becomes less credible with time. There is indeed the danger that anybody who is not willing to be part of the solution will be perceived to be part of the problem. I, therefore, feel obliged to call on all the social partners to adopt a long-term perspective and sign up to a substantial reform package which would lay the foundations for renewed growth and sustainable development. A thriving economy is the best social policy. BIS Review 67/2004  5
Datuk Zamani Abdul Ghani: Role of development financial institutions in the financial system Speech by Datuk Zamani Abdul Ghani, Deputy Governor of the Central Bank of Malaysia, at the International CEO Forum of the Development Finance Institutions 2005, Kuala Lumpur, 12 September 2005. *  *  *  I would like first of all to express my sincere appreciation to the Association of Development Finance Institutions of Malaysia for inviting me to say a few words this morning on "The Role of Development Financial Institutions (or DFIs) in the Financial System". It is indeed an honour to address such a distinguished gathering of CEOs and senior officials of DFIs from many parts of the world. Before going further into the subject at hand, allow me to congratulate the organisers for jointly putting up this international forum. This forum provides a platform for CEOs and senior officials to exchange views and ideas on SME development and just as important, the roles of DFIs in this endeavour. I would also like to specifically welcome the foreign participants to Malaysia and wish that you will have a pleasant and enjoyable stay in Kuala Lumpur. My remarks this morning will consist of three parts. The first provides an overall perspective on the universal establishment of DFIs in many parts of the world; the second will look at the prospects and some of the challenges for DFIs in carrying out their roles; and the final part will provide an insight into the roles of DFIs from the Malaysian perspective.

With the growing and changing global economy, I have no doubt that DFIs will remain important and relevant to meet the increasing developmental needs of their respective countries. This development, indeed, presents both opportunities and challenges to the DFIs in the way forward. While the expanding economies, both in the developed and developing countries, would create greater business activities for the DFIs, this also means that they have to remain innovative in their products and services by exploring new ways of doing business, to be able to respond effectively to the different financing and developmental requirements. DFIs must continuously evolve and review their areas of comparative advantage in order to remain relevant, effective and strategic. To drive performance, one important aspect is to clearly identify key performance indicators for the DFIs, in order to measure efficiency and effectiveness in performing their mandated roles. Recognising DFIs' developmental role, the performance measurement of a DFI should go beyond the standard financial measurement to encompass quantitative and qualitative non-financial indicators that evaluate the economic and social contribution of DFIs, consistent with their objectives of establishment. For DFIs that are involved in SME development, the key performance indicators should include the number of new start-ups financed, the extent of borrowers receiving advisory services and the number of SMEs that have "graduated" from the DFIs. An important aspect to highlight is the need for DFIs to be financially sound and sustainable in their operations.