samchain/econo-pairs-v1 huggingface dataset:
Here, a more stringent implementation of rules and procedures to check and correct excessive deficits and debts will be essential, among other things by increasing the automaticity and speed of procedural steps. Ultimately, the process needs also to comprise non-pecuniary forms of deterrence. In the most severe cases of persistent non-compliance, a limitation or suspension of voting rights should be considered. The second area of institutional reform tackles one further aspect of the crisis: the fact that seemingly sound public budgets can sometimes reflect an overheated economy. When rising asset prices boost revenues from financial and housing market transactions, the budget looks sound; but when asset prices fall, the budget can go into profound distress. So for all its critical importance, reinforced fiscal surveillance is not enough. We need reinforced macroeconomic surveillance. There is one indicator that can reveal underlying weaknesses as they are forming: losses of competitiveness. Within a monetary union, the relative competitiveness of economies measures the sustainability of national price and cost developments, the compatibility of national nominal trends with those that are likely and appropriate for the union as a whole. The third area of institutional reform will be a crisis management framework. This framework has to respect strict conditionality and minimise moral hazard. It is an issue that has not yet been addressed in the task force itself.

Therefore in July 2006 Bank of Albania decided to shift the course of monetary policy by raising the base rate (7 days repo rate) with 25 basis points. We are happy to observe that market is reacting following our decision. However based on our short term inflation forecasts and in presence of several risks, some of which I already explained above, Bank of Albania perceives that inflation pressures for the next 12 months remain elevated. Currently we are cautiously evaluating the extend of market response and assessing whether further action is needed. Simultaneously Bank of Albania is becoming increasingly concerned regarding the quality of loan portfolio. The accelerated pace of credit expansion, is posing challenges to both banks and to supervisory authority. The response to these challenges will aim at achieving macroeconomic stability, by means of a well capitalized banking system. With this goal in mind, the Bank of Albania, as the supervisory authority, has intensified the dialogue with the banks in order to find an adequate consensus for: setting realistic objectives of annual activity growth; containing the credit expansion and maintain good credit portfolio quality; strengthen the internal control and risk monitoring systems; and monitor carefully the capital indicators. I would like to use this floor to emphasize that Bank of Albania will be very firm to follow strictly all requirements that derive from the law and regulatory framework.
Basel II seeks to align capital regulations more closely to banks’ current practices – it will not change the way that banks actually evaluate risk to decide whether to invest in emerging market economies. To understand this answer, we must first understand the issue that may have triggered this debate. One of the valid criticisms of the 1988 Accord concerns its rather arbitrary treatment of country risk. The 1988 Accord assigns risk weights, and hence capital charges, to sovereign governments and related borrowers, as well as to banking organisations, based on whether the country in question is a  BIS Review 33/2004  3  member of the Organisation for Economic Cooperation and Development. The “OECD Club Rule,” as it has become known, assigned a zero percent risk weight to exposures to sovereign government borrowers that were members of the OECD, which means that no capital had to be held against such sovereign exposures. In contrast, exposures to all other countries were assigned the standard 100% risk weight, which is equivalent to an 8% capital charge. The Club Rule was meant to help distinguish between higher and lower risk sovereign borrowers and their banks. In retrospect, it seems to be an unfair way to divide the world. Indeed, some OECD member governments have experienced serious economic shocks that threatened their repayment abilities, while several non-OECD member governments have performed extremely well in the international debt markets.

Thomas Jordan: Structures of a new financial system Summary of a speech by Mr Thomas Jordan, Vice-Chairman of the Governing Board of the Swiss National Bank, at the Volkshochschule Zürich, University of Zurich, Zurich, 15 April 2010. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Well-functioning financial systems are fundamental for long-term economic growth. They enable capital to be allocated efficiently and facilitate trade in goods and services. However, financial systems also harbour major risks. The recent financial market crisis clearly revealed the vulnerability of our globally integrated financial system. Wrong turns taken in the past few years together with government rescue measures have led to a situation that is, from a liberal perspective, untenable. All this underscores the urgent need to make financial systems more robust and to minimise the risks faced by governments and by national economies as a whole. It will not be possible to banish crises forever, since we cannot be sure what the origins of the next crisis might be or when exactly it will occur. Building a more robust financial system therefore represents a major challenge. The key role that banks play in the economy combined with their high level of vulnerability clearly underline the necessity of effective bank regulation. Greater stability and security, however, do not automatically mean less efficiency or growth. On the contrary, the creation of an intelligent and stabilising framework is a basic prerequisite for the efficient functioning of the financial system.
Thirachai Phuvanatnaranubala: The strengthening and development of regional bond markets Speech by Mr Thirachai Phuvanatnaranubala, Deputy Governor of the Bank of Thailand, at the APEC Business Advisory Council Meeting, Tokyo, 16 May 2003. *  *  *  Lessons from the Asian crisis – a local perspective Thailand’s experience The crisis of 1997 brought to light weaknesses in the country’s financial sector development and the sequencing of liberalization policies. Prior to 1997, the function of financial intermediation fell almost entirely on commercial banks. They mobilized funds mainly through deposits, which accounted for roughly 80 percent of domestic banking liabilities. At the same time, they held almost 70 percent of total financial sector assets, most of which were in the form of credits to the household and corporate sectors. Direct financing through the domestic bond market – through both public and corporate bonds – was relatively small and not well developed. Nine consecutive years of fiscal surplus between 1988 and 1996 provided no incentive for the government to issue regular and substantial amount of government bonds. The resultant limited supply of government bonds inhibited the development of a risk-free benchmark against which to price corporate issues and mark to market daily trading. The crisis brought to the fore an imbalance in the structure and operation of the Thai financial markets. With financing channels limited to bank loans, Thai businesses faced severe liquidity crunch as the banking sector sharply curtailed their credit operations amidst high non-performing loans and massive recapitalization needs.

I would therefore like to share with you after a brief description of what preceded the economic slowdown we have now entered – my view of what are the core issues for assessing growth and inflation prospects for the near future, both in the USA and in Sweden. The driving forces behind the economic upturn in the USA The very optimistic expectations regarding long-term growth comprised an important driving force behind the sustained rise in the US economy. It was the rapid developments in information technology and the telecom sector in particular that were assumed to have such spread effects to the rest of the economy that production was expected to continue increasing at a more rapid rate than before, even in the long term. Investments therefore rose strongly, particularly in the IT sector. There were also many people who claimed that future fluctuations in the business sector would be less pronounced than before. Efficient stock management and trimmed production processes were assumed to be factors that would reduce the risk of major fluctuations in growth. The USA had taken the step into a “new economy”. And developments on the stock market reflected the belief that “this time it’s really different”. At the same time, the fact that demand could increase so strongly and over such a long period of time without inflation accelerating in the USA was regarded by many as the revenue from breaking earlier economic ties.
To a significant degree, the crisis was about regulatory gaps – be it gaps in terms of loosely regulated mortgage underwriting practices in the United States, the activities of bank-sponsored structured investment vehicles (SIVs) and conduits, the providers of insurance guarantees against structured finance products such as AIG Financial Products Group, or the structured  1  In this regard, I am considerably more worried about countries that implement standards that are more lax than the norm, rather than more tough than the norm. However, if many countries individually were to opt for tougher standards, this could raise questions about whether the international norm is too lax. 2  Work underway by the Basel Committee on Banking Supervision and others all are designed to make the traditional banking sector more robust. This includes requiring more and higher quality capital, better capturing of risk in the application of capital standards, imposing a capital leverage limit on banks, raising liquidity buffer requirements, and requiring compensation regimes to be consistent with financial stability. 2  BIS Review 28/2010  finance models of the rating agencies and others that turned out to be defective. Thus, the experience of the recent crisis strongly suggests that confining regulatory reform to strengthening the banking sector would be insufficient to make the financial system as a whole resilient and robust. A crucial case in point is the too-big-to-fail problem. Having some firms that are too big to fail creates moral hazard, which distorts incentives.

There are three key initiatives under FAIR of particular relevance to the life insurance industry. These are the web aggregator, direct purchase insurance products and the balanced scorecard framework. BIS central bankers’ speeches  1  Web aggregator 8. First, the web aggregator. Life insurers offer a wide range of life insurance products to cater to the varied financial needs of consumers. However, it can often be a daunting task for consumers to be sufficiently informed of what’s available to meet his needs and to have some easy way to compare life insurance products. 9. I am pleased to note that a web aggregator will be launched in early April as a collaborative effort between MAS, CASE and the life insurance industry. This will provide a single information portal that will enable consumers to easily look up available life insurance products and compare indicative quotes based on specified parameters in a user-friendly and interactive manner. Direct Purchase Insurance 10. Second, direct purchase insurance products, or DPI. This is a new class of life insurance products for basic needs that is “retail-access friendly”. •  It will be simpler as the features of DPI are broadly standardised. This allows a consumer to make straightforward product comparisons when deciding which DPI to purchase. •  It will be easier to buy as consumers who know what they want and do not need financial advice will be able to buy DPI directly from life insurers. •  It will be cheaper as no commissions will be charged. 11.
We are also restricting the new licences to players anchored in Singapore for two reasons. First, so that we maintain a strong local core in our banking system, which must remain our objective as I explained earlier. Second, to avoid an unintended unilateral liberalisation of our full bank regime as a result of our WTO commitments. MAS will also issue up to three digital wholesale bank licences, which will be open to both local and foreign players. The digital wholesale banks will be introduced as a pilot, and 34. MAS will review whether to grant more such licences in the future. Safeguards 35. To ensure high-quality applicants, MAS will set prudent baseline requirements on track record and sustainability of business models. MAS will not allow value-destructive competition to the detriment of long-term financial system stability. We will also put in place safeguards to protect depositors, mitigate the risk of untested business models, and minimise costs to the financial system in the event of a failure. We will also ensure that digital banks will compete with incumbents on a level playing field. 36. As digital full banks will have access to retail deposits, MAS will phase in their permissible activities via a two-stage process to minimise risks to retail depositors. It will also be required to be a member of the deposit insurance scheme. A digital full bank will commence as a restricted digital bank to build up its business model and internal processes, and gradually progress to become a full functioning full bank.

The assessment which guided today's monetary policy decision was that, overall, the prospect has strengthened for inflation to fall below 2% in the course of 2003 and to remain in line with price stability thereafter. Our decision should also help to improve the outlook for the euro area economy by providing a counterweight to some of the existing downside risks to economic growth, thereby supporting confidence. The most likely scenario is that economic growth will gradually recover in the course of 2003 towards rates more in line with potential. Falling inflation should support real disposable income and, together with a reduction in the gap between perceived and actual inflation rates, should underpin private consumption. Moreover, we expect an improvement in world demand. This, and the low level of interest rates, should benefit investment. Let me point out that, with today's decision, the key ECB interest rates have reached a very low level by historical standards. The Governing Council will continue to monitor closely all factors that may affect the prospects for inflation in the euro area. The outlook for the euro area economy will also very much depend on visible progress in other policy areas. Regarding fiscal policies in the euro area, I would like to reiterate that budgetary discipline strengthens the conditions for sustainable growth of GDP and employment. Therefore, sound fiscal positions, as enshrined in the Treaty and further developed in the Stability and Growth Pact, are in the interest of all the Member States.
No matter how good the financial regulations are or how hard the supervisors try, external surveillance can only supplement, but not replace, good internal controls. This means that a suitably designed control system endorsed by the Board of Directors must be put in place to ensure that there are effective checks and balances within the firm to monitor and detect breaches of the approved risk taking parameters and code of conduct in dealing with clients. “Culture” The last “C” is “Culture”. This is a more difficult concept to explain than the first two “Cs”. But I’ll try. Competence basically means having the technical expertise to conduct financial businesses. It can be learned through different channels, such as formal education, in-house programmes or on-the-job training. Control means having a system within a firm that monitors and manages risk-taking or the conduct of its staff. People within the firm are required to behave in a way that is prescribed by their rules. To put it in another way, people behave properly because they have to or else they would face unpleasant consequences if and when they are caught. In contrast, culture refers to a set of internal values shared by a group of people that influence and shape their mindset and behaviour. Culture and values normally define what is proper and what is not. Culture makes people behave in a certain way because they want to behave in that way and not because they have to. Let me use a day-to-day example to illustrate this point.

They must be able to control the amount and types of risks based on prudent parameters. The history of the financial world is littered with staggering examples of breakdowns in risk control by firms, all of which inevitably led to disastrous outcomes not only for the firms themselves, but also for the societies as a whole in many instances. I don’t think I need to labour today why control and governance of risk-taking are important to the continued success of financial firms, large and small. The second type of business that financial firms undertake is the provision of advisory services and distribution of financial products. This category covers a wide range of financial services, including investment banking, wealth- and asset- management and brokerage. As these firms are offering advisory services, or marketing and distributing financial products, they are not taking risk using their balance sheets. However, control and governance are no  2  BIS central bankers’ speeches  less important than for the first type of financial firms because these firms must be able to treat their customers fairly and take into account their interests in offering their advice and products. Again, we have seen many instances in which a breakdown in the control of the sales process has resulted in mis-selling of financial products that were not suitable for the customers. One point I wish to highlight here is that a good control and governance framework can only be established within the financial firms from the top down.
But, for the region as a whole, this kind of integration is less striking than the presence of banks from the developed markets. For example, the number of US and European banks in Hong Kong roughly equals that of banks from the region. Similar observations may be made about the equity markets. In declining order, we now come to monetary integration. There have, in fact, been some recent efforts at monetary co-operation. These began in 1995 with the collection of EMEAP bilateral swap facilities that provide US dollar liquidity secured against US Treasury securities. In 1997 the idea of an Asian Monetary Fund was aired, but it came to nothing. Then, in 1999, came the collection of ASEAN+3 bilateral swap arrangements under the Chiang Mai Initiative. These cannot be said to amount to efforts towards monetary integration. And, in fact, while ideas may have been thrown around from time to time, there has not really been any formal discussion among Asian authorities that I am aware of towards monetary union. Why is this the case? I think it is mainly because the obstacles to union appear to be so daunting, and that the special considerations that apply to the Asian case throw up so many difficult questions. These "special considerations" are big matters, and they can be conveniently divided into three broad categories: economic, technical and political. Let me give a brief outline. The economic issues concern the viability of an Asian monetary union.

Now it is true that slightly over half of trade within non-Japan Asia is processing trade geared towards meeting import demand outside of the region, in particular in the developed economies. But this reliance on demand from the developed economies has been decreasing, and is likely to continue to decrease. Trade integration within the region is therefore likely to grow. Financial integration in the region shows a more mixed picture, and can be said to be high or low depending on what exactly is meant by financial integration, which is not at all clear. In terms of foreign direct investment, the degree of regional integration seems high if we look at the available figures on the sources and destinations of FDI within the region. The most striking examples are the various economies in the region as a source of FDI for China, and as destinations for FDI from Japan. But in terms of financial intermediation within the region - meaning the flow of savings into investments, other than FDI, through the banking, debt and equity channels - the degree of financial integration is not high at all. The very substantial, and growing, volume of domestic savings invested overseas goes mainly, on a gross basis, to the developed rather than the regional markets.
With this in mind, the key questions are: 1) Where are we in the adjustment process, and 2) what, if anything, can monetary policy do to facilitate a smoother adjustment and more rapid progress toward our dual mandate objectives? In terms of the adjustment process, starting on the household side, most signs point to significant progress. For example, the revisions to the national income and product accounts announced in July revealed substantial upward revisions to the personal saving rate (Chart 5). The current saving rate is broadly consistent with the historical relationship between personal saving and the household net worth-to-income ratio. Of course, part of this story depends on the stabilization of household net worth, which had earlier fallen sharply due to declines in both home and equity prices. Although household net worth dropped significantly again in the second quarter according to the Flow of Funds accounts, the subsequent rise in the U.S. equity market is likely to have reversed that decline. Meanwhile, housing price declines have moderated substantially, helped, in part, by the fact that the low  2  BIS Review 127/2010  level of mortgage rates combined with the sharp drop in house prices has resulted in a substantial improvement in affordability (Chart 6). Households have retrenched in terms of their borrowing and this has helped push down the household debt-to-income ratio sharply from its peak in 2007. Another factor behind the fall in the debt-to-income ratio has been credit losses and debt forgiveness.

During the panels, formal Q&As, and sidelines of the conference, I encourage you to share your views on these topics and other changes that you are confronting, with a focus on the opportunities, risks, and mitigants. By sharing our perspectives, community banks can continue to play a central role in the sustainable provision of financial services to customers in the Second District. Moreover, by working together to address these changes, the New York Fed and the broader regulatory community will be better positioned to achieve its goal of creating safe, sound, and stable banking and financial systems that support the U.S. economy. Thank you for your attention. 1 Aggregate Second District data is based on Call reports and UBPR data from 114 firms. 2 Fintech Trends to Watch in 2018, CB Insights. 4/4  BIS central bankers' speeches