samchain/econo-pairs-v1 huggingface dataset:
Ardian Fullani: The convergence of economic systems and institutions of South East Europe towards the EU – a view from Albania Lecture by Mr Ardian Fullani, Governor of the Bank of Albania, at Bocconi University, Milan, 10 October 2007. *  *  *  Good Afternoon Ladies and Gentlemen, Dear Students, I am pleased to appear before you tonight. This is a fantastic occasion and I am delighted to share with you some of my thoughts and findings over my country and the Balkan region. 1. Few words on Albania  I would like to start my presentation by saying few words on my country, on its roots, on its past and its present. Albania is a small country placed in the Southeastern Europe, bordering the Adriatic Sea and Ionian Sea, between Greece, Macedonia, Kosovo and Montenegro. It is generally recognized today that the Albanians are one of the most ancient people in southeastern Europe. All indications point to the fact that they are descendants of the Illyrians. Authors of antiquity relate that the Illyrians were a sociable and hospitable people, renowned for their daring and bravery at war. Illyrian women were fairly equal in status to the men, even to the point of becoming heads of tribal federations. The land of Illyria was rich in minerals – iron, copper, gold, silver – and Illyrians became skillful in the mining and processing of metals.

Muhammad bin Ibrahim: The challenges of corporate governance in the financial services sector Keynote address by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the University Malaya’s (in collaboration with the Asian Institute of Chartered Bankers and the International Centre for Education in Islamic Finance) Workshop on “The Challenges of Corporate Governance in the Financial Services Sector”, Kuala Lumpur, 6 August 2014. *  *  *  It is my pleasure to be at this workshop on the theme of “Challenges of Corporate Governance in the Financial Sector”. I would like to congratulate the University of Malaya, the Asian Institute of Chartered Bankers and the International Centre for Education in Islamic Finance for the joint effort to organise this event. I am also encouraged to see speakers from the world of academia, the financial industry and the public sector congregate to offer different perspectives on this important topic. My remarks today will touch on recent issues relating to corporate governance standards with particular emphasis on the financial sector. The growing emphasis on good governance The motivation for strengthening corporate governance in the financial sector is well-established. Unlike other industries, the financial sector plays an important intermediary role that relies heavily on public trust and confidence. Being highly visible entities, any lapse or failure in the governance of financial institutions, whether real or perceived, would attract adverse public reaction and could severely affect their reputation and public confidence.
This is one of the reasons why a new Intergovernmental Conference on enlargement-related issues will be convened by the end of this year. In this regard, as provided for in the Treaty on European Union, the Eurosystem would stand ready to take part in any initiative taken by the competent EU institutions on issues falling within its competence. Such institutional adjustments should be without prejudice to the fundamental features of the Statute of the ESCB, namely the Eurosystem’s mandate and its independence. The Eurosystem is closely monitoring developments in accession countries, which are directly related to its own areas of competence. Of course, this is done in cooperation with the countries concerned. A network of contacts has been established with the relevant central banks, and several bilateral and multilateral meetings have been convened in recent months. This process will be intensified over the coming months and years, with a view to deepening cooperation in areas of mutual interest. In this regard, I should like to mention the high-level meeting with the central banks of the accession countries to be held in Helsinki next month. Let me now turn to the role of the euro, the ECB and the Eurosystem in the world economy. 3. The role of the euro, the ECB and the Eurosystem in the world economy  The introduction of the euro certainly represents one of the most profound changes in the international monetary system since the collapse of the Bretton Woods system in the early 1970s.

The euro is the currency of an economic area with a population of nearly 300 million people and one-sixth of world GDP, which is significantly higher than that of Japan, although smaller than that of the United States. The euro area is the largest trade partner in the world economy with a share of 20.1% in world exports, followed by the United States with a share of 16.3% and Japan with a share of 7.6%. Given these facts, it is stating the obvious to say that the euro and the Eurosystem are likely to play an important role in the world economy. By reducing the number of key players in the international arena and by strengthening the awareness of each player to take up its respective responsibility, the euro will contribute – over time – to facilitating international cooperation. But the transfer of competence for monetary policy from the national to the Community level also implied that new arrangements had to be found in order to allow the Eurosystem to participate and represent the euro area in matters of its competence. Devising the appropriate arrangements was complicated because of two specific features: the first relates to the fact that membership in different fora (for example, the G7 or the G10) varies across euro area Member States. The second derives from the fact that full membership in intergovernmental institutions such as the International Monetary Fund (IMF) or the Organisation for Economic Cooperation and Development (OECD) is restricted to countries only.
8  https://www.bankofengland.co.uk/prudential-regulation/publication/2019/solvency-ii-equity-release-mortgages-part-2  8  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  8  Looking ahead over the next several decades, climate change is a new reason why individual house prices might diverge from the national average. Climate scientists predict a rise in sea levels. Flooding from rivers and surface water run-off is likely to increase. More frequent droughts will bring more widespread subsidence. An important recent paper by Climate Wise – a group  comprising representatives from insurers – considered the consequent risks to UK property lenders.9 The paper argued that flood insurance is likely to become more expensive and continued availability of cover cannot be assumed. Within insurance, climate change physical risks are often seen as primarily an issue for general insurers. But the life insurers (as well as the banks) have the long-dated property lending exposures. Using catastrophe models, the paper estimates a 25% increase in the number of UK properties at significant risk of flooding by 2100 if global temperatures warm by 2°C and a 40% increase if they warm by 4°C. The models suggest that this risk is unevenly distributed across the United Kingdom, with coastal regions most affected (Chart 8). To conclude, the PRA’s implementation of Solvency II works well as a prudential regime for UK annuity writers. But we do need to make the risk margin less sensitive to interest rates. Since the introduction of Solvency II, around £ billion of risk has transferred from defined benefit pension schemes to insurers.

We expect to finalise these proposals by the end of September so that firms can start applying the Test on their base balance sheets from the end of this year. Firms will need longer to review their internal model methodologies and make any necessary changes. We have proposed that this should take place by the end of 2021 at the latest. A key point to draw out is that lenders of equity release mortgages are exposed to the risk of individual property prices. This is because insurers provide a no-negative-equity guarantee to every borrower. Modelling approaches focused on house price indices do not capture all the risks – a portfolio of options is a very different thing to an option on a diversified index. Indeed UK insurers have experienced a number of these guarantees crystallising in recent years despite the rapid rise in UK house price indices over the past decades. One reason is that different localities of the United Kingdom have seen widely varying house price inflation – a national index masks the range of outcomes (Chart 7). Another is that some properties may become dilapidated if elderly borrowers are unable to maintain the property. Willingness to maintain may be lower where borrowers have limited or no equity remaining in their properties. Equity release contracts generally require properties to be maintained. But, in practice, losses do occur and cannot necessarily be recovered.
This also means that the main cost of joining the euro area - the loss of monetary policy independence has already been largely incurred as the euro carries a 70% weight in the currency basket and the progressive lifting of exchange controls has reduced the central bank’s ability to set interest rates independently of world markets. Second, the Maltese economy is already closely integrated with the euro area. This is borne out not only by trade patterns, but also by the similarity of Malta’s sectoral distribution of value added and employment. Our business cycle, too, has become increasingly correlated with that of the euro area. BIS Review 16/2004  1  This synchronization is likely to grow further as exchange rate volatility declines and transactions costs fall and, if the correlation between business cycles is indeed endogenous in a monetary union, as our trade with the euro area intensifies. In addition, differences in productivity levels between Malta and the euro area in the traded goods sector appear to be minor, which suggests that the BalassaSamuelson effect is unlikely to be strong. Similarities are also to be found in the financial system. For example, the degree of financial intermediation in Malta is comparable to that of the euro area, and the long-term interest rate is well within the Maastricht reference value. Further evidence that the economy seems well prepared to join a monetary union is the fact that nominal wages have been sufficiently flexible to carry the burden of adjustment implicit in a fixed exchange rate regime.

Michael C Bonello: Central bankers’ view of the new challenges Speech by Mr Michael C Bonello, Governor of the Central Bank of Malta, at a conference entitled “The Challenges for Central Banks in an Enlarged EMU” organised jointly by the European Community Studies Association (ECSA Austria), Research Institute for European Affairs (IEF) and Oesterreichische Nationalbank, Vienna, 20-21 February 2004. Mr Bonello was a panelist on the discussion regarding “Central Bankers’ View of the New Challenges”. *  *  *  When ten countries, including Malta, join the European Union (EU) on 1st May, they will assume the status of “Member States with a derogation”, meaning that they are exempt from the stricter rules of EMU. This may seem to imply that the transition to EMU is thereby rendered easier, but a careful examination of the conditions attached to the process reveals that the policy issues involved are anything but straightforward. This is particularly true of a small open economy like Malta’s in which macroeconomic policy is strongly conditioned by the external environment, but which has nevertheless succeeding in reconciling a hard currency peg with relative exchange rate stability for over thirty years. Malta has a population of only 400,000. Its nominal GDP of € billion, or less than 0.1% of that of the EU, translates into a per capita income which is around 69% of the EU average. Market services, including tourism and finance, account for nearly two-fifths of GDP, while manufacturing contributes almost a quarter.
Chart 8b shows that interest rate risk has indeed risen in periods of low interest rates or, as happened between 2009 and 2014, has remained at high levels. At the current margin, we are seeing first signs that risk has once again increased slightly since the introduction of negative interest. A third potential risk to financial stability arises from the fact that, in the prevailing interest rate environment, non-banks such as insurance companies and pension funds in search of yield also find the prospect of granting mortgage loans attractive. Even though currently only a relatively small portion of mortgages is granted by non-banks, it is doubtful whether the banks will be able to maintain the current elevated asset margin on new mortgage loans in a prolonged period of negative interest rates. The increased competition as a result of non-bank  5  Yields on real estate investments are often compared with those on Confederation bonds. The different levels of risk on these asset classes do justify a certain risk premium or yield spread, but that spread is currently very high. We can thus assume that there is a significant spread, even after the different levels of risk are taken into account. 6  The term maturity mismatch describes an imbalance between the usually longer repricing maturity on the assets side (e.g. for mortgage loans) and the shorter repricing maturity on the liabilities side. BIS central bankers’ speeches  5  participation could reduce banks’ scope for raising mortgage rates.

However, it will return to positive territory in the medium term. Negative interest and financial stability So the negative interest rate is currently essential to ensure appropriate monetary policy conditions for the Swiss economy. But we also know that low interest rates, and in particular a prolonged period of low rates, pose a risk to financial stability. Experience in many countries has shown that such conditions provide fertile ground for imbalances to develop in credit markets and asset prices.2 Indeed, under normal circumstances, lower money market interest rates lead via transmission channels to lower credit and mortgage rates. In Switzerland, the focus is on the mortgage and real estate markets, as around 85% of private domestic loans are in the mortgage segment. Chart 5 shows that, despite negative money market rates, mortgage rates have not fallen; they have even risen slightly. Movements in mortgage market rates seem to have become decoupled from SNB monetary policy. How can this development be explained? It is true that a lowering of interest rates into negative territory differs from a conventional interest rate cut in terms of its transmission to mortgage rates.3 This is because interest on deposits and savings make up a considerable portion of banks’ refinancing costs. Whereas, in a positive interest rate environment, banks would not hesitate to pass on falling money market rates to holders of deposit and savings accounts, when rates are negative, they are reluctant to do so.
The steps required to mitigate the inflation risk through sterilization can involve big fiscal costs.4 Neither option is attractive, though the former strategy of currency appreciation is much less problematic if other EMEs are acting in a similar manner. Meanwhile, we all have to bear in mind that current circumstances put stress on the support for open global markets in the developed world. On the U.S. side, the recovery remains distinctly subpar in spite of aggressive monetary and fiscal stimulus. On the monetary policy front, short-term rates remain near zero and the Federal Reserve is just about to complete its $ billion Treasury purchase program. On the fiscal policy front, the U.S. government has engaged in large stimulus program. This supported demand and employment while the private sector shifted its saving balance into surplus in an effort to repair balance sheets. However, the large size of the fiscal deficit and the rapid increase in the country’s federal debt-to-GDP ratio means that this is not sustainable for much longer. Ultimately, the composition of economic activity in the United States needs to be rebalanced. There are two issues here. First, the consumption share of GDP may still be too high. 3  In nominal dollar terms Chinese exports rose 20 percent annually from 2000 to 2010. The Federal Reserve Bank of New York estimates volume growth of about 18 percent. 4  EMEs typically issue sterilization bonds to offset the increase in the money supply caused by foreign exchange intervention.

With this regard, the Data Management Group would act as the owner of the project. In addition, as the project itself is very crucial, which could create some wide impacts throughout the organization, the Bank of Thailand realizes its significance and hence assigning a group of high-ranking officials in forms of the Steering Committee to closely monitor the progress along the way. The committee panel is led by the Assistant Governor, Information System while I also serve as the project sponsor to ensure that the data management system project could well progress in accordance with the pre-scheduled plan. As for the roles of financial institutions which are major providers for a good deal of financial data in the system, most institutions have to bear high burden, both human labor resources as well as other expenses for data submission under the current system. With the implementation of the new system, most institutions unanimously provide great cooperation - to create comprehensive data transmission network that could accommodate all data transfer demands in time. Today’s opening ceremony presents the first phase of the financial institution electronic data submission project. From today onwards, financial institutions’ submission of over 200 hard copy and CRF reports would be substituted by merely 41 data sets. Consequently, this would more or less lessen the burden and make it more convenient for financial institutions to report data to the Bank of Thailand.
All these assets are in relatively scarce supply in EU accession countries with ten years of independent banking history. However, we have got a few initial building blocks in place. We have looked at our banking data in the light of the very recent IMF research and were encouraged that our statistics covers the key indicators fairly well. Secondly, we have dedicated significant resources to improve our analytical skills over the last couple of years. And finally, we have had an encouraging experience on stress testing during the FSAP mission last year, although the approach was simple. Against that background, we will give considerable attention already this year to further upgrade of financial system analysis and we are looking forward to cooperate in that respect with our friends in Europe as well as in Washington. IV. Safety nets: crisis prevention  From here, I would like to proceed to the other major challenge for the central bank – to build up financial safety net. We know that a full-fledged financial safety net consists of two major pillars: crisis prevention and crisis resolution. Efficient analysis is a sine qua non for every effort to prevent financial difficulties. Of course, we have the problem that all models tend to be perfect in forecasting the past while their predictive power is unknown at best. Therefore, our concern is how to build a network of institutions that would minimize the risk of a sudden shock.

In some cases, the extreme private sector solution – winding-down of the troubled institution – would probably be the preferred approach. The Law on Credit Institutions together with the Bankruptcy Act provides central bank and other authorities with all necessary powers for closing down the business and letting trustees to take care of the practical aspects. The Deposit Insurance Fund will immediately reimburse all depositors within legal limits. BIS Review 63/2001  3  Of course, in other situation, different approach must be taken and a strict adherence to the former rule is not feasible. Nevertheless, the initial response would still be the private solution. One option would be the central bank to take the lead as an honest broker and bring together all private and official parties concerned. Ideally, that would result in design of ad hoc private solution in a form of merger, acquisition or emergency support. The role of central bank would effectively be the application of moral suasion, without committing public funds. However, one can and should not wholly dismiss the need for direct public intervention should it become necessary. What will be different in our case is that in case of serious trouble, the dividing line between liquidity support and capital injection would be rather blurred or these operations may even take place simultaneously, after writing down capital of the troubled institution. The need for very close coordination between the central bank, the government and supervisors is characteristic feature of this approach.
Imports will remain notably buoyant, in line with the strength of final demand. This dynamic activity will provide for continuity in employment creation, to which the moderation in labour costs will prove conducive, and, as I stated earlier, it will allow the unemployment rate to continue falling. Factors of risk The main risks for the Spanish economy from the external environment are associated with the possibility of a sharper-than-expected decline in the emerging economies. Within the Monetary Union, headway in institutional architecture and the agreements reached with Greece have lessened financial tensions in the area. On the domestic front, the main risk is the possible influence of the uncertainty surrounding medium-term economic policy developments on agents’ spending decisions. In particular, these risks are associated with the possibility of a loss of confidence due to the exhaustion of or slippage in the reform process, or to the non-fulfilment of fiscal consolidation commitments, given that these have been the pillars upholding the adjustment of the Spanish economy, the pick-up in competitiveness vis-à-vis the euro area members as a whole and, in short, our economic recovery. The challenges to and strengths of the banking system Turning to the situation of our banking system, I would firstly like to highlight the efforts Spanish banks have made to improve their solvency. These have taken the form not only of enhanced capital ratios, regardless of the solvency ratio used, but also of an increase in the absolute volume of own funds.

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.