samchain/econo-pairs-v1 huggingface dataset:
That includes adopting correctly aligned macroeconomic and macroprudential policies, leaning into the wind by buying part of the inflows into foreign exchange reserves and, in the limit, deploying selective capital inflow management tools. The FX risks of banks and private sector entities need close monitoring and prudential limitations. Third, the design of the financial sector in small, open economies: The financial sector has to be smaller than it has been in countries like Iceland, and international activities must be restricted as long as such countries are not part of a credible multilateral safety net. The idea of building international financial centres in countries like Iceland and Ireland is dead – for the time being, at least – as it is not safe under the current framework. Fourth, the EU framework for cross-border banking: It was very much this framework that facilitated the cross- and off-border expansion of the Icelandic banks through the so-called European passport. It was and is deeply flawed, and it contributed in a significant way to both the Icelandic banking crisis and the crisis in the eurozone. The basic problem is that the freedoms are not matched by public action and frameworks at the EU and EEA level. Bank size relative to country size was tacitly assumed to be a matter of no concern, and FX risk was largely ignored.

In short, good governance works and we should all simply try it! In conclusion therefore, I would like on behalf of Bank of Zambia and indeed on my own behalf to commend the Zambian commercial banks, international banks and development finance institutions that have participated in this syndication. This is not only testimony of their confidence in Celtel Zambia plc but confidence in the Zambian people and the economy as well. I thank you. 2  BIS Review 126/2006
6 A central bank’s decision to act in this manner should not be interpreted – as has sometime happened – as indicating that the development of property prices and credit volumes is an end in itself of monetary policy. The reason that the central bank is leaning against the wind is, of course, that it thereby still expects to achieve a more stable development in the real economy and inflation. One could say that the central bank sees property prices and credit growth as indicators saying something about the way in which inflation and resource  5  “This time is different” is the title of a newly published book by Carmen Reinhart and Kenneth Rogoff (Princeton University Press). The book analyses financial crises occurring over several hundred years. The title is a reference to the phenomenon that, even though it is common knowledge that crises occur every now and again, there seems to be a tendency to believe that, on just this occasion, there is probably no danger. 6  See for example Donald L. Kohn, “Monetary Policy and Asset Prices,” speech held 16 March 2006, Federal Reserve Board and Frederic S. Mishkin, “Housing and the Monetary Transmission Mechanism”, in Housing, Housing Finance and Monetary Policy, Federal Reserve Bank of Kansas City Jackson Hole Symposium, 2007. 14  BIS Review 68/2010  utilisation may develop over the longer term. However, it is clear that such a monetary policy places great demands upon a central bank’s communications.

Indeed, developments in recent years have demonstrated that monetary policy and financial stability, in many ways, are more intimately connected than we may previously have imagined. One of the challenges I intend to address today deals with the difficulty of assessing the effects on potential output and growth of the financial crisis and the regulations following in its wake. Another challenge concerns the impact of these regulations on monetary policy’s transmission mechanism. Finally, I will also discuss the possibility of preventing a credit-driven property boom. One highly current and significant challenge is that of preventing the central government finance problems primarily facing Greece, but also a number of other countries, from leading to new problems on the financial markets. The solution to this must primarily be sought on the international political level. This is a matter both of implementing measures to maintain confidence and of solving the most acute problems. The comprehensive support package for countries with serious budget problems, recently presented by the EU countries and International Monetary Fund, should be considered one such measure. Of course, a more lasting solution will also require the problem to be tackled at its root – for the regulatory framework for central government finances to be reviewed so that similar situations can be avoided in the future. Discussions on how best to do this have also been initiated. Hopefully, this will be enough to restore calm and for the process of recovery and normalisation following the financial crisis to continue.
In addition, central banks may choose to participate in distorted financial markets where there may be threats to financial stability, as is sometimes done with reserve accumulation and exchange rate intervention in EMEs, or as has been the case of some interventions in debt and other asset markets in advanced economies. However, interventions beyond currency markets must be truly exceptional and only on the grounds of preserving financial stability or complementing monetary policy. Another way to control the vulnerability of the system to the reversals of asset prices is to limit the amount of debt that finances the purchase of those assets with higher prices or increase capital buffers for such debt. In terms of macro prudential policies there are a series of options for this. Higher capital requirements for intermediaries participating in the business of making leveraged purchases of financial assets are one option. In the same vein, reducing loan to value (LTV) ratios in mortgage loans, increasing provisions for housing loans or increasing capital requirements on mortgage lending are all viable options if the distortion is in the housing market. Several countries in Asia have been actively using LTV caps over the last couple of years to reduce the risks from housing price booms. Which of these tools should be used will depend, however, on the institutional setting of each country, the functioning of the financial system and the asset price that is distorted.

José De Gregorio: Current challenges to central banking in emerging market economies Presentation by Mr José De Gregorio, Governor of the Central Bank of Chile, at the International Symposium of the Banque de France: Regulation in the Face of Global Imbalances, Paris, 4 March 2011. *  *  *  I am very grateful for comments and discussions with Rodrigo Cifuentes, Kevin Cowan, Luis Oscar Herrera, and Enrique Orellana. I am very grateful for the invitation to participate in this panel on Lessons from the Crisis on the Role of Central Banks. The crisis has revealed weaknesses in the functioning of financial markets and the regulatory and supervisory frameworks in several advanced economies, which went through years of credit expansion and leveraging that ultimately proved unsustainable. There are many lessons to be learned in order to reduce the likelihood of another crisis of this magnitude. Indeed, many of the policies implemented during the recent crisis, and which helped to avert a catastrophe, were lessons we learned from the Great Depression. But the recent episode has also revealed the strengths of policy frameworks and financial systems in emerging market economies (EMEs) that were able to successfully mitigate the effects of the worst global crisis since the Great Depression. Fiscal prudence, more autonomous central banks, low inflation, flexible exchange rates, and financial regulation and supervision, consistent with their lower degree of financial sophistication, were central to this unprecedented performance.
One of the by-products of the new technology is that it does enable banks to measure risk more precisely. The Committee intends therefore to exploit this by enabling banks to use an internal ratings-based approach to calculate the credit risk for various types of borrowers and consequently the amount of capital they need to hold. Less sophisticated banks will use a standardised approach where the risk weightings for various classes of borrower will be determined by external credit ratings. One feature that is particularly relevant to today’s discussion is that for the first time there will be an explicit capital charge for operational risk. This seems to be a timely move given the increased operational complexity introduced by technological change. The new Accord will be unveiled for further consultation at the beginning of next year. Although its implementation is still a few years away, I would strongly advise banks to start to prepare for it now, for example by upgrading their loan classification systems and beginning to measure and monitor operational risk. The new Capital Accord will be relevant not only to capital requirements but also to the pricing of risk. If regional banks wish to remain competitive with the global players operating in their territories, they will need to become more conscious of return on capital and the need to economise on the use of capital. There is one other aspect of the changing environment to which I believe banks should pay closer attention. This is what might be termed the rise of the consumer.

Bank liquidity remains at historically high levels, and this, coupled with the fierce competition for new lending business, has pushed down lending margins, particularly in the all-important mortgage portfolio. 1  BIS Review 93/2000  It is not only that the market is not growing as fast as it did. The traditional, local players are also beginning to encounter more pressure from global firms, non-bank entrants and competing sources of finance. The competitive environment is giving added impetus to the need for banks to consider how they can use the new technology, and particularly the internet, to drive down costs and broaden income sources. In Hong Kong around 20 banks have introduced transactional banking services for retail customers. Many have already introduced corporate banking services through the internet, or will shortly do so. So far the take-up of these services seems in general to be rather slow. However, a few banks have achieved reasonable levels of usage by customers either because they were early movers or because of their leading market position. Customer acceptance of the internet will undoubtedly grow. But it will not happen overnight, and the contribution to the bottom line will be slow to emerge. In the meantime, the banks will have to bear the extra costs of the investment in the new technology, while margins may come under pressure from the increased ability of consumers to shop around and compare prices.
The next step is for the policymaker to evaluate what tools might be available to curb the imbalances that have been identified. The idiosyncratic nature of the innovations and belief systems associated with particular bubbles implies that the tools used to respond to each bubble will likely have to be different and tailored to the features of the particular bubble in question. 7  See Eli Ofek and Matthew Richards. 2003. “Dotcom Mania: The Rise and Fall of Internet Stock Prices.” Journal of Finance LVIII, no. 3 (June): 1113–37. BIS Review 43/2010  5  Finally, the policymaker needs to conduct a careful cost-benefit analysis, weighing how successful a particular policy might be in restraining the rise in asset prices versus how costly it would be to remain passive, letting the bubble grow and then potentially burst disruptively. Many factors will affect the outcome of this analysis including the magnitude of the potential asset bubble and whether the potential asset bubble is occurring in the equity or debt markets. In this analysis, the policymaker is likely to find that compared with equity market bubbles, credit market bubbles are more prone to generate higher costs when they burst. Thus, the benefits of preventing credit bubbles from forming and collapsing are likely to be higher. Credit bubbles that burst threaten the stability of the financial system much more directly than equity bubbles. 8 That is because much of the debt is held by banks and securities dealers that are highly leveraged.

The motivations of the business community to engage in Corporate Social Responsibility are numerous. •  Firstly, investment by the business community in the promotion of social goods such as education and health can have a direct impact on the productivity of the community and profitability of the private sector. This contributes to the physical and mental health of the company’s employees, hence enhances social and human capital. •  Secondly, the sensitivity of a firm to the concerns of a society can contribute positively to its reputation and the acceptability of its products. •  Thirdly, beyond improving the customer-company relationship, Corporate Social Responsibility can foster harmonious relationships between various stakeholders in a society. BIS Review 28/2006  1  •  Lastly, it is acknowledged that a stable environment is generally good for business. Ladies and Gentlemen, institutions such as the Bank of Zambia is no exception in this respect. The core function of the Bank of Zambia is “to formulate and implement monetary and supervisory policies that ensure price and financial stability.” The overall objective of this is to contribute to the attainment of a stable macroeconomic environment i.e. low and stable prices, low and positive interest rates, stable exchange rate, stable financial system as well as fiscal prudence so that the private sector can flourish. Many of you will agree with me that since 2002, Zambia’s macroeconomic indicators have generally been improving.
Need for “a rethink” – a reanalysis It is clear therefore that our Swedish framework for macroprudential policy has major flaws in the way its objective has been formulated, the processes for allocating tools, clarity in the division of responsibility and in legal status. This is problematic as it has contributed to delaying measures that can counteract the high and growing household indebtedness. In their evaluation, Goodfriend and King point out that both the mandate and division of responsibility for macroprudential policy are in need of review. I agree. Without going into more detail about their concrete recommendations, I can see that, based on a socioeconomic efficiency perspective, it would be appropriate to utilise the expertise, experience and resources in the macroprudential policy area, possessed by the Riksbank in its capacity as the central bank, in a better way than is currently the case. There are many different ways of doing this, of which, from both an international and national perspective, the most efficient in the long run would probably be to merge the Riksbank and Finansinspektionen. This would gather our skills and expertise together and strengthen Sweden’s voice internationally. This is certainly a far-reaching change, the collective effects of which would most definitely need to be analysed very thoroughly. It is not in line with the current structure, but when the world around us is changing, our central agency structure sometimes also needs to do the same.

Flaws in the Swedish macroprudential policy framework In Sweden, Finansinspektionen has been given the main responsibility for macroprudential policy. In addition, there is a financial stability council – consisting of representatives of the Government, Finansinspektionen, the National Debt Office and the Riksbank – which is a  14  See Goodfriend and King (2016). BIS central bankers’ speeches  7  forum for the discussion of financial stability issues. I believe that there are significant flaws in several aspects of the Swedish framework for macroprudential policy. Firstly, experiences so far of the Swedish framework indicate clear inadequacies in decisionmaking power. An obvious example is the protracted discussions on the introduction of a binding amortisation requirement. An important cause of the problem is that the macroprudential policy objective is unclear and too narrow. For example, it should be made clear that macroprudential policy instruments may be used not just to manage risks to financial stability, but also to reduce risks created by the financial sector in the real economy. It must also be clear that macroprudential policy includes the entire financial system and not just the credit market. A clarified and broadened objective is also appropriate in order to bring Sweden’s framework in line with European standards. 15 There is also a lack of clear and expeditious procedures when new macroprudential policy tools are to be introduced.
Michael C Bonello: Financing the small business sector – constraints and opportunities Speech by Mr Michael C Bonello, Governor of the Central Bank of Malta, at the European Federation of Ethical and Alternative Banks and Financiers Seminar, St.Julian's, 15 April 2010. *  *  *  The holding of a seminar on credit for small businesses is both appropriate and timely given the important role played by these enterprises in modern, free-market economies and the contribution they are likely to make in the recovery phase as economies emerge from recession. It is perhaps not widely known that of the almost 20 million enterprises active within the European Union (EU) in 2005, 99.8% were small and medium-sized enterprises (SMEs), defined as businesses that employ fewer than 250 persons. 1 In turn, more than nine-tenths of these were micro enterprises, with a workforce of fewer than 10. In 2005 SMEs accounted for 58% of the value added generated in the EU and 67% of all employment, compared to 55% in the US. 2 Small businesses are a major source of dynamism in the Maltese economy too. SMEs constitute the overwhelming majority of businesses, accounting for over 99% of the total and two-thirds of total employment. The vast majority are micro enterprises. These small operations act as customers of, and suppliers to, larger companies and are an essential source of entrepreneurship and innovation.

Criteria 3, 4 and 5 introduce conditions that cannot easily be observed. We have to apply judgement. The criteria contribute to consistency and structure the discussion. The Riksbank also applies judgement when selecting the interest rate path. But Svensson does not discuss possible shortcomings in the macroeconomic model. In Chart 10, he shows how the various interest rate paths, differing by around ½ percentage point in the period to summer, could result in differences in the inflation rate of close to 4 percentage points as early as next autumn. Monetary policy seems to be having a very strong impact. It would be interesting to hear whether he thinks that relying so heavily on such a model in interest rate setting is robust, and how possible errors in the model should be guarded against. We also know from experience that market participants’ perceptions can differ from ours, particularly somewhat further ahead. There can be a variety of reasons for these differences and Svensson discusses a number of them. It would also be useful to study the volatility surrounding publication of key macroeconomic variables. We would prefer to see lower volatility around monetary policy meetings, and that any surprises are postponed to a time closer to the publication of new macroeconomic data. Solberg Johansen (2008) – winner of the Bertil Ohlin prize for best thesis in international economics at the Stockholm School of Economics – examines volatility in the yield curve.
That will depend on whether we persist in seeing through the regulatory reforms that began a few years ago. It will depend on  BIS central bankers’ speeches  1  whether we keep to a sensible balance in regulation – and that includes not over-doing bank regulation and under-doing the oversight of shadow banking. It will also depend on whether we all stay intensely alert to the risks of the future, including especially the risks that we do not yet see or know, rather than focus only on the last battle or on preventing the last crisis from recurring. 7. What of global capital flows? There too we see shifts, as global finance responds to a two-track world of economic growth. The prospect of sub-par growth in the advanced economies for a number of years, together with central bank actions to keep interest rates very low, have led to what is becoming a furious search for yield. Pension funds and insurance funds need better yields badly, and they are putting more monies in the emerging markets and other risk assets. 8. This is likely to be more than a cyclical trend. We are seeing a secular shift in assets towards the emerging markets. Advanced country funds in fact remain significantly underweighted in emerging market assets, and are gradually correcting for this. At the same time, sovereign debt ratings have been raised in several emerging economies, in Asia especially1, at the same time that a number of advanced economies2 have seen their ratings lowered.

But it also means we have a long way yet to go in reducing debts and returning to sustainable growth. 5. We are also seeing important shifts in the structure of global finance, besides the gradual contraction in global liquidity. It is too early to say where we will be five years from now, but some of the broad brush-strokes in this new landscape of global finance are already with us and likely to stay: •  The return on equity in global banking has fallen, and will not return to pre-crisis levels, given stricter capital and liquidity rules. •  Deposits have become more important as a source of bank funding. •  Banks in certain major jurisdictions have retreated from global markets, and worryingly, and may stay in retreat for some time. •  The securitised debt markets should recover, but with less leverage underpinning them, and hopefully greater risk transparency. •  In the derivative markets, there will be greater standardisation of products, and much greater reliance on common market infrastructure – for trading, clearing and reporting of trades. High volume, low-margin platforms will likely gain in competitiveness. •  Wealth management will remain a growth industry, especially in Asia, where the pool of wealth is growing most rapidly and the need for diversification remains great. •  And outside of intermediated finance, companies will seek new ways of raising funds, including through private placements. 6. Will this mean a safer financial world? Maybe.