samchain/econo-pairs-v1 huggingface dataset:
For the offshore industry in Labuan, which has benefitted significantly from Labuan since its inception, it is time to give back. 1/4  BIS central bankers' speeches  There are various ways in which the industry can assist the local population, such as innovative and creatively designed technical and industrial training that can assist in uplifting the job prospects of local talents. For example, fit-for-work programmes that leverage on online courses to complement industry supported training programmes and on-the-job training will improve the job fit of the workforce. Needless to say, strong commitment by industry captains to grant similar opportunities, apprenticeship and fit-for-work schemes will surely hasten the upskilling of the locals. The industry ought to come together to devise a scheme that give opportunities to locals to get good jobs. As we move forward, we need to be more focused on the outcomes we want for Labuan. We want a more balanced growth. A clear step forward is to formulate clear and measurable targets, and to review them consistently. The primary performance indicators that should be applied must cover aspects such as; contribution towards Malaysia’s and Labuan’s GDP, quality of job creation, training and development for the local population, investment in infrastructure, access to financing by local SMEs. We must ensure that the benefits we obtain outweigh the incentives given by the government such as the revenues foregone from the notional tax incentives offered. The old adage – “You can’t manage what you don’t measure” – captures the essence of this idea.

For Norwegian households, changes in house prices will therefore probably have a greater impact on consumption than changes in equity prices. In Norway, it became more common to own equities for all income and age groups in the 1990s. This was to a large extent reversed last year as a result of the fall in equity prices. We should nevertheless not rule out the possibility that fluctuations in equity prices in the future may have stronger effects on the real economy than we have witnessed so far. Developments in various asset prices may also influence investment. High equity prices may make it easier to gain access to capital to finance the acquisition of new machinery and buildings. A rise in property prices provides scope for raising larger loans against collateral in the asset. Possibilities for increased credit may contribute to higher demand for goods and services. The process may be self-reinforcing since part of the available credit can be used to purchase dwellings and other property. Similarly, bubbles in the stock market can result in overinvestment. When equity and property prices start to fall, companies are left with too much real capital and investment declines. This may lead to or amplify an economic downturn. There may be several factors that imply that particular emphasis should not be placed on financial imbalances in the conduct of monetary policy. First, it may take a long time before imbalances are triggered. The uncertainty surrounding developments so far ahead is considerable.
Economies of scale appear to operate among banks with assets less, perhaps much less, than $ billion. But above that threshold there is evidence, if anything, of diseconomies of scale. The Weitzman marginal private cost curve is U-shaped. 31 Experience in the US following the McFadden Act suggests size in banking can bring benefits. Over 9,000 US banks failed during the Great Depression, the majority of which were unit banks. Friedman and Schwarz (1963) blame the absence of bank branching for the high failure rate among US banks. The costs of limited branching were also felt well after the Great Depression in higher-cost provision of banking services, in particular for larger companies using lending syndicates to finance large-scale investment. 32 US experience after McFadden chimes with cross-country evidence drawn, in particular, from developing countries. For example, using a dataset of 107 countries, Barth et al (2004) assess the effects of restrictions on the efficiency and stability of the financial system. They find evidence that restrictions are damaging to both, in particular barriers to foreign bank entry. Do those arguments resonate within advanced country banking systems today? Two comprehensive studies in the mid-1990s found that economies of scale in banking are exhausted at relatively modest levels of assets, perhaps between $ billion. 33 A more recent 2004 survey of studies in both the US and Europe finds evidence of a similar asset threshold.

Commercial banks around the world have begun to find the technology to tackle such challenges profitably. However, there must be rewards to financial innovation and risk management capability that encourage financial institutions to address these segments of the markets profitably since a financial undertaking which looses money over time is not sustainable. The adoption of the New Accord, therefore, must ensure that the financial need of the dual economy is served. Secondly, while the Bank of Thailand can help foster the infrastructure for risk management, we must avoid the problem of taking away the incentive for, and accountability of, the private institutions to manage their own internal database that could be used for their own models in the long run or to manage their own risks. If a regulator oversteps the bound, there may be risk of moral hazard. Much difficulty will go into walking the thin line in overseeing safety of a system and to avoid "approving" the risk model or risk management system. I hope that this seminar will shed light on the experience in other countries. These challenges are complex and difficult in nature, but we must tackle them successfully to ensure that the Thai financial institutions are strong members of the global financial community. The market risk seminar today is a strong indication of this intention to meet the challenges. Back in 1996, the Bank of Thailand had already embarked on the study and preparation for the adoption of the '96 Accord on Market Risk.
To keep overall demand growing – and inflation stable – in the face of trade deficits, they needed to keep short-term interest rates low and domestic spending strong. In the United Kingdom, Bank Rate has averaged just 4 ½% in the past 5 years. In 2003, it was as low as 3 ½%. But even then, the UK had the highest interest rate in the G7. In the United States, the Federal Reserve cut its interest rate to just 1%, and in Japan, experiencing deflation, interest rates were just 0.1%. Those developments were inevitable if the world economy was to continue to grow. But the price was unusually low interest rates – both short and long-term – which were considerably below the levels to which most investors had become accustomed in their working lives. Dissatisfaction with these rates gave birth to the “search for yield”. This desire for higher yields could not be met by traditional investment opportunities. So it led to a demand for innovative, and inevitably riskier, financial instruments and for greater leverage. And the financial sector responded to the challenge by providing ever more sophisticated ways of increasing yields by taking more risk. But some of those new instruments were so opaque  BIS Review 114/2007  1  and complex that investors lost sight of the risks involved. Until, that is, they were brought down to earth with a bump on August 9.

When the crisis struck Asia in 2008, there were fears of a drying up of trade finance as European banks started deleveraging and cutting back from the region. As it turned out, Asian banks stepped in decisively and trade finance volumes recovered strongly. •  Between 2008 and 2013, trade finance volumes at Chinese and Hong Kong banks have more than doubled while those at Indian banks rose more than half over the same period. •  Eurozone banks have since recovered some of their market share, but the Asian banks remain significant players. This afternoon I would like to discuss three key forces that will shape the course of banking and finance in Emerging Asia over the medium term: •  economic growth;  •  financial regulation; and  •  technological innovation. Economic growth Let me begin with growth. The near term economic outlook for Emerging Asia will be shaped by two themes: the ongoing recovery in the G3 economies and the slowdown in the Chinese economy. •  The underlying growth momentum in the US appears intact despite a disappointing start to the year. BIS central bankers’ speeches  1  •  The Eurozone is recovering from a double dip recession and financial stresses have abated. •  In Japan, domestic demand is strengthening, following the negative consumption tax shock of last April. •  However, China, which had been supporting global demand in recent years, is experiencing a deceleration in growth amid a property downturn and softer exports.
In fact, in annual terms, the seasonally-adjusted series of total and other GDP grew more than the original series: 1.3% and 1.5% respectively (figure 2). Second-quarter activity was also influenced by some one-time shocks that hit the manufacturing industry. Even so, the stronger impulse of the more consumer-related activities, such as trade and services, continues to stand out, while some investment-related sectors, such as construction and some business services, have weakened further. Total domestic demand increased 3.9% annually in the second quarter, with significant inventory build-up, partly responding to replenishments after a long period of depletion. However, there are signs that it may have been more than the state of the cycle would suggest, which could result in reduced imports in the coming months. In turn, final domestic demand —excluding inventories— was somewhat lower than expected, and continued to account for the dissimilar behavior of consumption and investment (figure 3). Consumption shows a somewhat stronger growth, with improvements in several of its fundamentals. One important concern about the economy early in the year was the deterioration of the labor market, in particular the salaried employment drop in annual terms. This was one of the risk factors that led us to accelerate the MPR reduction at the beginning of the year. This risk has faded in recent months. Indeed, in the last few months salaried employment has resumed its positive annual variation rates and some of its quality indicators have ceased to deteriorate.

The chart shows a subset of a larger model, which also includes equity volatility, house prices, bank capital and macroeconomic control variables. The second standout from the chart is that developments in debt prior to the 2008 financial crisis would have been sufficient to make an economic earthquake 2% more damaging. As it was, almost 4% of output was lost in the three years between 2008 and 2010. Why did output fall so much more than might have been expected? Was it bad luck? Was the economic earthquake off the Richter scale? Our research concludes that the 2008 recession was not the result of an unusually severe earthquake. The UK’s current account deficit and debt run-up prior to the crisis meant we were closer to the fault line. As important was the fact that the banking system did not have the strength to reflect that. As a result, it collapsed, tightening financial conditions for the economy and adding to the damage. Once we account for these factors, the depth of the 2008 recession is consistent with a 1-in-20 economic earthquake (Charts 14 and 15). It wasn’t that we were hit by a seismic event of unprecedented scale. The scale of the economic damage was avoidable.
Exhibit A of the fallibility of consensus thinking is the herd mentality among supposedly sophisticated financiers as well as theoretical economists who believe in efficient-markets theory and other nonsense themes that led us into the recent financial crisis. I happen to believe that Margaret Thatcher, the former British prime minister, was right when she said, “You cannot lead from the crowd.”1 There is a role for contrarians, not just in the investment arena, but also at the highest level of policymaking; at a minimum, it is important to question and challenge consensus views, even when they are formed by the most credentialed individuals. For example, some of you may recall the public letter written by 364 eminent economists predicting disastrous consequences that would result from Thatcher’s policy initiatives. That letter was published in the Times of London on March 30, 1981.2 The British economy began a recovery almost immediately afterward, in 1982; by 1983, inflation and mortgage rates were at their lowest levels in over a decade, while economic growth accelerated. The failure of the consensus view led Chancellor of the Exchequer Geoffrey Howe to define an economist as “a man who knows 364 ways of making love, but doesn’t know any women.”3 To be sure, economic theories and econometric models are of great utility for providing a framework for policymaking; we cannot make policy without them. But they are imperfect substitutes for common sense.

Nocera noted that “in 2007, the chief executives of the Too Big to Fail Banks made, on average, $ million … more than double the compensation of the top nonbank Fortune 500 executives.” A recent survey conducted for the Wall Street Journal of CEO compensation at 350 public companies shows that financial services compensation has been tempered; the rate of increase in compensation for 2010 was just 1 percent.11 The Journal attributed this to higher levels of scrutiny of financial firms as well as pressure from shareholders and regulators. Even so, some financial-sector CEOs enjoyed robust increases in their total compensation, including a 74 percent increase and a 51 percent increase at two of the five largest U.S. banking organizations. Interestingly, the trading revenue of these two firms accounted for almost half of the $ billion in total trading revenue mentioned by Mr. Wilmers. These recent numbers buttress Nocera’s reasonable conclusion that bank CEOs “were being compensated in no small part on their trading profits – which gave them every incentive to keep taking those excessive risks.” I am sympathetic to these concerns. I have no problem with risk takers being rewarded with large compensation packages. I put my own and my partners’ capital at risk for the 20 years I operated in the markets and profited handsomely. But I never was provided with capital that was safeguarded by government guarantees.
During the 1990s crisis employment fell more than GDP, but during this crisis the situation has been the reverse. Many companies appear to have chosen to retain existing staff, perhaps because their assessment has been that demand will return fairly soon. Many wage agreements will be renegotiated this year, but we are expecting the weak labour market situation to contribute to holding back wage increases during the forecast period. This contributes to lower cost pressures in the economy. As the companies have considerable spare capacity, they can manage to meet increased demand abroad and here at home  8  BIS Review 25/2010  without their production costs rising significantly. This has a strong impact on productivity, which is now expected to increase after having fallen for three years in a row (Figure 8). Figure 8 Lower cost pressures and increased productivity Annual percentage change  Sources: The Riksbank and Statistics Sweden  The krona has been weak during the crisis. It is not unusual that small, open economies like the Swedish one are affected by a depreciation of their currency in times of turbulence in the international financial markets. The krona has strengthened considerably since its weakest point and we are now assuming that it will gradually strengthen further, as we put the financial crisis behind us. This will help to reduce inflationary pressures in the period ahead.

Here we must show ability to take action, and I shall return to this at the end of my speech here today. Some of the difficult considerations to be made concern when and how quickly central banks, governments and other public authorities around the world will withdraw the strong economic stimulus they have been providing during the crisis. Now that the financial markets are more stable and the recovery in the economies has begun, it is time to move towards a more normal situation, not least with regard to monetary policy. We must make the transition from monetary policy during a crisis to monetary policy in an economic downturn. For the Riksbank and many other central banks, the question of when to begin raising the policy rate, and how quickly, is a fairly difficult balancing act. BIS Review 25/2010  1  I intend to begin by talking about the considerations behind our most recent policy rate decision and our forecast – the policy we consider necessary for inflation to be close to the target of 2 per cent, at the same time as providing support for production and employment. Transition from crisis interest rate to monetary policy in an economic downturn At the most recent monetary policy meeting three weeks ago the Executive Board decided to hold the repo rate unchanged at the historically-low figure of 0.25 per cent.
That said, the trend going forward is less favourable, calling for mobilisation  2.1  Three factors are currently raising concerns  Despite the quality of this snapshot for 2018, the outlook – the medium/long-term trend – calls for vigilance and mobilisation. Three factors are effectively weighing on the profitability of both French and European banks. The first two mainly concern retail banking: continuing low interest rates and digitalisation. The maintenance of a low interest rate environment is completely justified and necessary in light of the economic situation in the euro area. However, it is also squeezing net interest margins for retail banks, which finance themselves with deposits and not at variable rates in the market, as well as reducing returns on insurers’ investments. In the case of banks in particular, the issue should certainly not be ignored, but we also need to avoid blowing it out of proportion by claiming it is the only factor weighing on euro area bank profits. On April 10 the Governing Council explicitly said: “In the context of our regular assessment, we will also consider whether the preservation of the favourable implications of negative interest rates for the economy requires the mitigation of their possible side effects, if any, on bank intermediation.”ii Let’s allow time for this work to be done and for the necessary decision to be taken.

According to some estimates, in the past ten years European investment banks have lost 10 percentage points of their market share to US banks.iii This can be attributed to the difficulties European banks face in achieving the critical mass needed to operate in a global market. And Brexit will do  Page 3 of 5  little to change this trend if the European market remains fragmented. Conversely, US investment banks have the benefit of a huge domestic market where margins are higher. Their size gives them a decisive advantage when it comes to achieving economies of scale and competing for large-scale financing transactions. Faced with these structural challenges, French banks’ CIB divisions have already begun to refocus on more profitable activities and implement major cost-cutting plans. However, there is still a lot to be done, notably when it comes to industrialising processes and flows; digitalisation is also changing trading activities. 2.2  Banks and regulators therefore have three focuses for action  The main prerequisite for improving profitability is for banks to put in place individual restructuring strategies. There are a number of levers they can use for this: technological innovation, cost control or the diversification of revenue sources [slide 5]. On this latter issue, I would like to underline the resilience of the French “universal” or diversified banking model.
Moreover, many product and service sectors are represented by powerful lobby groups with vested interests that sometimes conflict with the interests of consumers and society as a whole. The Greek programme is one example; the authorities there faced strong resistance from pressure groups[25]. I have absolutely no doubt that one  BIS central bankers’ speeches  3  would meet similar obstacles when reforming, say, the German or French product and service markets. In fact, both these countries have been opposed to wider service sector reform at European level. And Germany is one of the countries that has realised the smallest share of potential benefits from the Services Directive according to the European Commission[26]. Strengthening the single market and governance If we view the euro area as a single economy and not as the sum of its 19 national members, we must have a common growth strategy based on identifying our structural weaknesses. The key words must in my view be “productivity” and “employment”, which are positive-sum games – not “competitiveness”, which could end up as a zero-sum game. The Member States will not lend much support to euro area growth by merely competing for their neighbours’ market shares. We have to act together to raise productivity and employment. Improving the functioning of the service market in the euro area is therefore important not only because of its large share of overall gross value added, 65% on average in the euro area, but also because 75% of the total labour force is employed in this sector.

Conclusion It is sometimes argued that the current expansionary monetary policy discourages governments from undertaking the necessary structural reforms in the euro area. But that begs the question: why weren’t these reforms carried out when interest rates were higher? We have to stop searching for reasons why structural reforms are not being addressed. To lift potential growth and strengthen the underpinnings of our Economic and Monetary Union, we need comprehensive, well-sequenced structural reforms in national Member States, as well as at European Union level. And we need them now. European citizens started losing trust in the European Union and its institutions when they started losing sight of their tangible benefits, that is, the impact of the integration process on their jobs and standards of living. Rapidly vanishing trust in turn prevents those steps towards European integration from being taken which are indispensable if we want to meet today's challenges. The burden of breaking this deadlock cannot be borne by the people of Europe: the burden must be borne by the EU and its institutions and by European governments. Indeed, the best way to respond is to identify a sequence of reforms for creating jobs and growth. If carefully designed, such a sequence can gradually recreate trust and lead us to where we want to be: to the point where a discussion on the future of Europe, and the degree of sovereignty which needs to be shared to secure it, is again possible. This is not low-hanging fruit.