In addition, the policy interest rate was lowered by 0.75 percentage points last year, the króna has appreciated by over 16%, the Central Bank has bought more than 350 b.kr. worth of foreign currency, the foreign exchange reserves have grown by over a third in foreign currency terms, and capital controls have been almost completely lifted in three large steps. These are substantial changes in a single year – changes that will presumably take their place in economic history. What lies behind these developments? How could the domestic economy grow by more than 7% in 2016 without overheating and unleashing inflation? Five major factors are presumably of considerable significance whose mechanism it is important to understand in order to assess what comes next and formulate appropriate economic policy responses. First of all, the supply side of the economy is more flexible than before, owing to increased economic integration with the rest of the world. The EEA Agreement plays a large role here, but so do other trade related agreements and 1  general market-driven developments in the global economy. Because of this, when demand pressures start to develop, it is easier than before to mitigate them: by importing labour and other production factors, by using foreign inputs in domestic production chains to a greater degree, or by moving a portion of operations out of the country. Last year, for instance, net migration among foreign nationals was closing in on the previous peak from 2006.
In one example, a PPI policy bundled with a mortgage – cost the customer more than £ over the term of the loan, even though the maximum amount claimable was only £ The FSA reported that this abuse stemmed from “a culture in banks and other firms that focussed on profit over customer outcomes”. Closer to our region, we saw in 2001 the unexpected failure of the Australian HIH Insurance Group, which experienced estimated losses totalling AUD 5.3 billion. This was attributed in part to a culture where the board was “unduly deferential” to management, and staff simply did not question leadership decisions. In fact, instances of failures in professionalism and integrity do not seem to have waned since the global financial crisis. According to the Boston Consulting Group, banks have paid fines amounting to USD 321 billion to regulators around globe since the crisis through the end of 2016. Instances of misconduct range widely – from the well-known rigging of LIBOR and Euribor rates, to the more recently uncovered case of Wells Fargo, where over 2 million fake accounts were 1/5  BIS central bankers' speeches  opened under a senior management who fostered “an atmosphere that prompted low quality sales and improper and unethical behaviour”. Our financial industry is not invulnerable to the ethical challenge. In the 1980s and 90s, we had cases of Malaysian banks that suffered significant losses arising from imprudent lending under ethically questionable decisions by top management.