samchain/econo-pairs-v1 huggingface dataset:
Mugur Isărescu: Building our place in Europe - young Romanians pushing the boundaries in technology Opening speech by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the conference "Building our place in Europe - young Romanians pushing the boundaries in technology", Bucharest, 24 October 2016. * * * Ladies and gentlemen, I am delighted to have been invited to address some of the best and the brightest of Romania’s younger generation. I must say I am impressed that you have built such a strong community here in the UK, judging by the large number of people present and the fact that this reunion is at its ninth edition. I congratulate the Romanian Embassy in the UK, the British-Romanian Chamber of Commerce, the Raţiu Foundation and all the other entities involved in the organisation of this event. I am happy to see that Romanian authorities, academia and non-government organisations are working towards strengthening the connection with Romanians abroad. We, at the National Bank of Romania, are also very interested to make use of the expertise of Romanians who have studied or worked abroad. Let me be more specific: we have now around 75 employees who either got post-graduate degrees at Western universities or have working experience in top European institutions, such as the European Central Bank, the European Commission or the Eurostat. Moreover, our internship programme is open to undergraduates studying abroad and we are glad to see increasing interest from such applicants.

SPEECH DATE:  29/05/2018  SPEAKER:  Deputy Governor Henry Ohlsson  VENUE:  Örebro University  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Data, correlations and economic policy challenges∗ At the beginning of the Riksbank’s monetary policy reports, there is a page describing the monetary policy strategy. The basis of the strategy is that the Riksbank shall strive towards an annual change of 2 per cent in the consumer price index with a fixed interest rate (CPIF). Given that there is confidence in the inflation target, monetary policy shall also support good growth in output and employment. The Riksbank therefore conducts what is generally referred to as flexible inflation targeting. This is the basic framework for monetary policy. Within this framework, the Riksbank must cope with the fact that the economy and the way it works change over time. My intention here today is to discuss some of the challenges facing monetary policy and economic policy in general as a result of changes that have occurred over the last decade. In brief, it is a question of surprisingly subdued wage increases, the apparent difficulty in reducing unemployment further via expansionary policy alone, and the apparent deterioration in matching on the labour market. I intend to discuss this with the help of a simple survey, in which I look at how five key variables covary. The time period I’m studying is 2007–2018 and I’m using monthly data.
This also means that supervisors should not carry out a mechanical assessment of these risks and their management by banks such as would result for example from the simple observation of a statistical confidence interval. The assessment must be more refined. In addition, Pillar 2 should ultimately serve to improve risk management in the areas that supervisors, at a given moment, deem to be crucial for financial stability, using a forwardlooking approach. Lastly, the recent financial turmoil has highlighted the difficulties and risks associated with the valuation methods used for certain financial instruments, particularly complex structured products but also some products regarded as more straightforward. Indeed, a sometimes very great disparity has been observed between the theoretical valuations derived from models and market values. However, the issue of the accurate estimation of the price of complex transactions has taken on particular importance with the gradual adoption across the board of fair value assessments since the entry into force of the new accounting standards (IFRS). In this respect, it seems necessary to include in risk assessments assumptions of an erosion of liquidity and a rise in volatility as well as, more generally, to ensure that processes for monitoring valuations within banks are strengthened. In particular, it is vital to reinforce critical, independent and regular analysis of valuations obtained for certain complex positions, which appear to have relied too often on external data supplied by external rating agencies or service providers, without real analysis of the characteristics of the underlying and collateral.

Following this process, the Commission bancaire will take a formal decision as to whether or not to authorise the institutions in question to adopt the advanced approaches of Basel II on 1 January 2008. For institutions with foreign entities, this authorisation is granted, where appropriate, following an exchange of information with the host supervisors, i.e. where the institutions’ subsidiaries are established. While many counties, such as France, have entered into the effective implementation phase of Basel II, the recent financial turmoil has once again drawn attention to this framework, leading some observers to call into question its overall rationale. This turmoil has new characteristics as it is a credit crisis in a market environment with particular implications concerning contagion channels. Risk transfer operations, in particular securitisation, and the interaction between funding liquidity and market liquidity risks have played new or at any rate greater roles than before. I am nevertheless convinced that the reform of the capital adequacy ratio rightly remains a crucial element in the regulatory response to the problems facing us today. I would now like to explain why I am convinced of this. 2. The current financial turmoil confirms the need to concretely implement Basel II. This turmoil may very legitimately raise questions about several of the major provisions of Basel II, such as the use of rating agencies or the internal approaches developed by banks to assess credit risk.
In my opinion, the policy realignment owed at least as much to our international contacts as to the successful opinion-forming work by, for example, the Centre for Business & Policy Studies (SNS). Many of the problems and measures that are being discussed are of a national nature; they vary between countries and it is in each country’s interest to solve them. Moreover, due to differences in the initial situation, the solutions may have to differ, too. One should therefore be cautious about imposing universal mandatory rules. Furthermore, solutions will presumably become more uniform as a result of increased trade and competition. It is likely, however, that fiscal and budget polices will be further coordinated, though this process will not necessarily be driven solely by principles and intellectual arguments. I am more inclined to guess that circumstances will bring this about by degrees  2  BIS Review 6/2002  as new problems, stemming from the member states sitting in the same boat, have to be tackled, perhaps in some cases at rather short notice. Fiscal policy in Sweden The problems for stabilisation policy So what about the problems for stabilisation policy that arise if the euro is adopted? We would clearly have to do without an independent monetary policy. By itself, this may imply a risk of larger cyclical fluctuations and it would also make a proper crisis more difficult to manage with measures of economic policy.

And I’m sorry in this respect to be jumping ship at this particular point. But I’m convinced that calmer waters lie not too far ahead. And I’ve every confidence that Mervyn King - who has in effect been our Chief Navigating Officer for much of the past decade, and who will take over as skipper at the end of the month, with an outstanding MPC and Bank crew to support him - will find the way through. I certainly wish them safe passage! My Lord Mayor, if the harsh international climate made life difficult for us on the macro-economic front, the associated, sustained, fall, in global equity markets in particular, made it an unusually tough time for many financial institutions here in the City. Happily, here too, there are more recent signs of improvement. Perhaps the truly remarkable thing about that is that the financial system as a whole withstood the pressures as well as it did. But over a longer time horizon the City’s financial institutions have responded remarkably well to sustained market pressure for change, and we have been outstandingly successful in fulfilling the City’s vital economic, and social, function of promoting growth and employment both in this country and across the globe. One can think of lots of reasons for that success - I pick out two in particular. First, we have managed over time to maintain a reasonable balance between creative market dynamics on the one hand and official intervention and regulation on the other.
In addition to the unified money market in the euro zone, we should aspire towards the full integration of capital markets. Simplified procedures for the adoption of secondary legislation that regulates the financial services area are an important step forward. The convergence of financial markets calls for a more extensive harmonisation of the legal environment in various countries. But it also requires closer co-operation between various national supervisory authorities and/or better co-ordination of supervision functions on the EU level. In addition, it should be taken into account that capital transfers between the member states would be easier if business laws and regulations of different countries are harmonised. Here I could mention rules governing companies’ mergers and takeovers, bankruptcy procedures, state aid distribution terms and conditions. A flexible labour market is extremely important for the effective common monetary policy purposes. However, it is unlikely that in the near future Europe will see any notable crossborder migration of the labour force - it is not expected to happen before or after the EU enlargement. Therefore, limited flexibility of the labour market should be offset by an efficient internal market, high capital mobility and greater flexibility of the domestic labour market. Fiscal policy - fiscal federalism In addition to the above-mentioned supply-related issues, the EU and its member states’ fiscal policy principles in the context of the common monetary policy have been under special scrutiny. It has been stated that enhanced co-operation within the fiscal policy area will allow to mitigate potential economic difficulties in various countries.

Filled with pride for the economic development of our country over the past decade, we must now concentrate more on the future. Estonia’s goal is not only the sustainable economic growth target of 5.5-6 per cent per annum but also the preparedness to join the European Union and to make maximum use of the opening opportunities. What should we then focus on especially? B.1  Challenges facing Estonian economy on its way to the European Union - overall economic policy stance  Estonian economy is already strongly integrated into the European economic area. From the perspective of the central bank I would like to refer to the clear convergence of the interest rate fluctuations and inflation cycles in Estonia and the European Union. The share of current and future EU member states in Estonia’s export is about 81%. In 1994-2001 Estonia’s export to the European Union increased on the average 25% per annum. Our exports to the European Union have steadily grown quicker than imports from the European Union. It means that we have been steadily increasing our market share in the European Union - although it is small. The export structure also characterises our competitiveness - exported goods reflect changes that have taken place in the economy. Our traditional export items are timber, textile and foodstuffs, but also, for example, parts and components of electric motors, cables, mobile phones, antennae and the like.
The main difference between this macroeconomic setting and that of the IMF or the European Commission is the lower decline in gross capital formation projected in the budget. Achievement of the targets set for 2013 may be jeopardised if tax receipts are affected by lower economic activity. Expenditure in the State and Social Security Budget is dominated by the interest on government debt, spending on contributory pensions and unemployment benefits. The sharp rise in these items reflects the increase in debt and the higher cost of new issues, demographic trends and the unfavourable performance of the labour market. To offset this expansionary trajectory, the Budget adopts an austere stance on other expenditure items, in particular the remuneration of public employees and real investment. Lastly, I must mention that the Budget for 2013 saw the culmination of one of the most important agreements of the Toledo Pact, namely the separation of the Social Security System’s funding sources: on one hand, contributory pensions, funded solely by social contributions and, on the other, non-contributory supplements and non-contributory pensions, funded by taxes. This separation, which began to be applied in 2002, will finally be completed in 2013. The bank restructuring process Finally, I would like to comment on the bank restructuring process under way further to the agreement entered into with the European authorities last July. Bank restructuring is progressing as scheduled.

For decades, the primary focus of these institutions has been on providing young people with cognitive skills. That model has worked well in meeting the needs of the skill-shifts seen through each of the three industrial revolutions. 59  Carney (2016). PM speech on science and modern Industrial Strategy, available here: https://www.gov.uk/government/speeches/pm-speech-onscience-and-modern-industrial-strategy-21-may-2018 61 For example: https://vanguardcommunications.net/doctor-online-review-study/ 60  16  All speeches are available online at www.bankofengland.co.uk/speeches  16  Whether that model will meet the needs of the Fourth Industrial Revolution seems more questionable, for two reasons. First, in future it seems very likely young and old alike will be in equal educational need – to train, retrain and retrain again through their 60 or 70-year careers. Second, the skills these people require for the future world of work will no longer be cognitive. Rather, they are likely to be more evenly balanced between the cognitive, technical and social - head, hands and heart. It has become rather trite to talk of the need for “life-long learning”. But never has the need for such learning likely to have been greater given the longer span and greater volatility in future career paths. Making these career transitions will itself call for a particular set of skills – personal resilience, problem-solving and flexibility. As is now well-recognised, these character attributes are best instilled in early years. If we now turn to our existing universities and colleges, at present these do not appear to be ideally sited to meeting either of these secular shifts in educational and training need.
In these three countries labour market institutions are currently assessed to be more flexible than in Luxembourg, Italy, France, Germany, Belgium and the Netherlands. This should help achieve a balance of employment protection that gives both stability – encouraging workers to invest in firm-specific skills – and mobility – allowing for reallocation between productive and non-productive sectors.1 These same countries have also introduced several measures to help connect wage levels more closely with actual productivity developments. The link between collective bargaining and economic conditions has been strengthened by the possibility for more firm-level agreements. In Greece, wage floors have been significantly reduced to boost youth employment creation; in Portugal, they have been frozen and overtime pay considerably reduced. Wage indexation has become less prominent in Spain and in Cyprus it has been abolished. In all these countries the labour market reforms have started to have an impact on private sector wages. Private sector compensation per employee has fallen significantly in Greece since 2011, correcting what was an unsustainable increase prior to crisis, and it has also started to adjust in Spain, Portugal and Cyprus in 2012–13. I fully recognise the difficulties this process creates, yet this has to be set against the need for wages to adjust to reduce unemployment and restore external competitiveness. We are expecting that that these positive effects will dominate going forward and help employment to begin recovering in the near future.

And, as my colleague Sarah Breeden explained last July, the PRA attaches great importance to making sure that the way we regulate and supervise these firms isn’t an unnecessary barrier to them realising their ambitions.10 That is why the PRA consulted last year on how we should regulate new and growing banks and has this month published a Supervisory Statement outlining our approach.11 What we need to make sure of now is that growing banks don’t face unnecessary costs from having to move from a simpler regime to more complex requirements once they reach a certain size. If simpler requirements are very different from the requirements for larger banks and building societies, a growing firm would have to make a substantial investment to adjust to the more complex rules it was growing into. If this was prohibitively expensive, it would become difficult for small firms to grow. That would work against what the PRA is doing to support effective competition in the banking system. That is what we want to avoid. We don’t want to trap small firms within a walled garden. Now, to some extent this could be achieved by giving small firms the option to stick to the full set of requirements if they know they 9  See https://www.bis.org/publ/bcbs129.htm. ‘Climbing mountains safely’, speech by Sarah Breeden, Executive Director, UK Deposit Takers Supervisions, building on marks given at the PRA Annual Conference for Chairs of the Non-Systemic UK Banks and Building Societies on 6 July 2020.
•  The implementation of the Banking Supervision Application Project, aimed at supporting banking supervision and providing a framework for supervision with the view of having a safer financial sector  Distinguished Ladies and Gentlemen, in order to promote greater access by the population to banking and financial services, the following have been implemented: •  Establishment of an automated electronic clearing house in 1999, (to speed up processing cheques from 4-10 days for local and country checks, to 2-5 days, respectively), enhancing the security of cheques and introducing machine-readable cheques. •  Establishment of a direct debt and credit clearing system (DDACC) and a realtime gross settlement system (RTGS) called Zambian Interbank Payment and Settlement System (ZIPSS) in October 2001and June 2004. The DDACC system has facilitated the transfer of money by electronic means for payment of bills and salaries while RTGS allows a speedy, safer and large value clearing facility. Commercial banks have also set up a foreign currency cheque clearing system. •  The adoption of the Financial Sector Development Plan (FSDP). This is a framework which aims to promote the development of a stable, sound and market-based financial system that would support efficient resource mobilisation necessary for economic diversification, sustainable growth and poverty reduction. Currently, key recommendations of the FSDP are under implementation. For example, the creation of a Credit Reference Bureau will improve the information available to credit providers in order to enable them to make better credit decisions.

As you are aware, the Comprehensive Assessment of major banks undertaken by the ECB marked the start of a trilateral relationship between banks, National Competent Authorities and the ECB in its role of supervisor of banks in the Euro area. The Single Supervisory Mechanism’s micro-prudential responsibilities will complement the existing ECB’s macro-prudential role in shaping the future of banking in the Euro area. Banking supervision, viewed as one of the tools at the disposal of the ECB, will help ensure financial stability which is needed to sustain macroeconomic growth. The demanding Asset Quality Review and stress tests coupled with an overall result that  BIS central bankers’ speeches  3  exceeded expectations set a positive mood in the market and should lead to easier access to bank funding for investment growth. Financial sector dimension of Malta’s competitiveness Turning to the Maltese context, it would be a pity if the low-cost credit conditions that are being offered by the ECB are not fully exploited in Malta. Broadly speaking, the overall participation in the TLTRO programme by core Maltese banks has been somewhat disappointing, with the participation of very few banks and with the actual take up being way short of the limits available. On the positive side, we have noted the introduction of a lending scheme that a domestic bank is funding from the ECB’s TLTROs. These TLTROs provide funds at very favourable terms – at a very low interest rate that is fixed for four years.
We have done so more or less right from the very start, even if, when the inflation-targeting regime was new, there was particular reason to emphasise that low and stable inflation should be prioritised. However, in the present framework, the considerations that we actually make as regards both inflation and the real economy have become more apparent. However, a number of problems still remain. For example, it is not obvious which measure of the real economy monetary policy is to stabilise nor how best to calculate the trend to be stabilised around. Quite different estimates can be made, not only in terms of the present and the future, but also of past events (Figure 3). However, it remains clear that intellectual progress has been made and that developments have moved forwards. So far, relatively few central banks have gone so far as to publish forecasts of their policy rates, as the Riksbank does. But it is clear that the manner in which monetary policy is conducted has developed in most parts of the world and is presently more open and clear than was the case fifteen to twenty years ago.

On the contrary, we should continue to adhere to increasing openness to competition and to the foreign investment that has contributed so much to our well-being in recent decades, focusing our efforts on promoting a climate conducive to business activity and on removing all obstacles and rigidities that hamper enterprise. To conclude, I wish to affirm my confidence that the Spanish economy has sufficient factors of resilience to successfully face the inevitable slowdown, even in an unfavourable external environment. Such resilience has been built up through the efforts of everyone (State, central  BIS Review 44/2008  7  government and other government bodies, and social agents), and has demonstrated the benefits of policies geared towards stability and long-term growth, particularly when the economy faces significant challenges such as those at present. Thank you very much. 8  BIS Review 44/2008