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The Nobel Prize in Economics goes to prosperity researchers

Darren Acemoglu, Simon Johnson and James A. Robinson received this year’s Nobel Prize in Economic Sciences for their contributions to proving the importance of public institutions to a country’s prosperity.

KEY FACTS

  • The prestigious prize, officially known as the Sveriges Riksbank Prize for Economic Sciences in Memory of Alfred Nobel, is the last prize awarded this year and is worth SEK 11 million ($1.1 million).
  • This year’s laureates showed that one of the explanations for differences in countries’ prosperity is the social institutions introduced during European colonization. Inclusive institutions were often introduced in countries that were poor at the time of colonization, which over time led to general prosperity for the population. This is an important reason why former colonies that were once rich are now poor and vice versa.
  • Introducing inclusive institutions would create long-term benefits for everyone, but extractive institutions provide short-term gains for those in power. As long as the political system ensures they retain their control, no one will trust their promises of future economic reforms. According to the laureates, this is the reason why there is no improvement.
  • “Reducing the huge income gaps between countries is one of the greatest challenges of our time. The laureates have demonstrated the importance of public institutions in achieving this,” said Jakob Svensson, Chairman of the Economic Sciences Prize Committee.
  • “Societies with poor rule of law and institutions that exploit the population do not generate growth or change for the better,” the prize’s organizers add on their website.

TANGENT

Darren Acemoglu and Simon Johnson work at MIT, while James Robinson is at the University of Chicago.

Acemoglu and Johnson recently collaborated on a book researching technology through the ages that demonstrates how some technological advances are better at creating jobs and spreading wealth than others.

KEY STORY

The Economics Prize is not one of the original science, literature and peace prizes created by the will of dynamite inventor and businessman Alfred Nobel and first awarded in 1901, but is a later additional prize established and funded by the Central Bank of Sweden in 1968.

Past recipients of the award include a number of influential thinkers such as Milton Friedman, and John Nash – played by actor Russell Crowe in the 2001 film A Beautiful Mind, and former US Federal Reserve Chairman Ben Bernanke.

Last year, Harvard economic historian Claudia Goldin won a prize for her work highlighting the causes of pay and labor market inequality between men and women.

EBA Tightens Focus On High-Risk Third-Party Arrangements To Streamline Banking Oversight

The European Banking Authority has issued new guidelines designed to sharpen supervision of third-party arrangements linked to critical functions, in a move intended to simplify parts of the EU banking regulatory framework while preserving robust risk controls.

A More Proportionate Supervisory Model

The new approach concentrates attention on arrangements whose disruption could materially affect a financial institution’s operations. By doing so, regulators and firms can direct resources toward higher-risk dependencies rather than spreading oversight too thinly across lower-risk service relationships.

In practice, the framework aims to reduce unnecessary operational and supervisory burdens associated with less material third-party arrangements, while maintaining strong standards for governance, resilience and risk management.

Covering The Full Third-Party Lifecycle

The guidelines apply to both ICT and non-ICT services, reflecting the increasingly interconnected nature of modern financial operations. Rather than treating technology risk in isolation, the EBA has adopted a more holistic approach to third-party risk management.

The framework spans the entire lifecycle of an arrangement, including risk assessment, due diligence, contracting, subcontracting, ongoing monitoring, documentation and exit planning. That breadth is significant: in financial services, risk does not end at onboarding. It evolves as dependencies deepen, services change, and counterparties expand their own supplier chains.

Feedback From Industry And International Standards

The EBA said the final version incorporates feedback from a public consultation, together with input gathered through targeted outreach. It also takes account of international standards, including the Basel Committee on Banking Supervision’s Principles for the Sound Management of Third-Party Risk.

That alignment matters. As banks and investment firms operate across jurisdictions and through increasingly complex vendor ecosystems, regulatory convergence helps reduce fragmentation and supports more consistent control frameworks.

A Transitional Period For Implementation

To support adoption, the EBA has предусмотрed a two-year transitional period, giving institutions and supervisors time to adapt to the new requirements in a proportionate and orderly way. The phased approach should help firms recalibrate internal policies, renegotiate contracts where needed and strengthen oversight of the most material external dependencies.

Broader Legal And Regulatory Context

The guidelines were developed under Directive 2013/36/EU, which requires the EBA to further harmonise governance arrangements, processes and mechanisms across EU institutions. In shaping the final text, the authority also considered several other key pieces of EU legislation, including the second Payment Services Directive, the Investment Firms Directive, the Markets in Financial Instruments Directive and the Markets in Crypto-Assets Regulation.

The regulation establishing the EBA was also taken into account, underscoring the breadth of the legal foundation behind the new framework.

What The New Rules Mean For Institutions

For banks, investment firms and other financial entities, the message is clear: not every outsourced service warrants the same level of regulatory attention. The new guidelines are designed to ensure that oversight is proportionate to the potential impact of failure, with greater scrutiny reserved for arrangements supporting functions that could seriously disrupt operations if compromised.

In a sector where resilience has become a board-level priority, the EBA’s move reflects a broader regulatory trend: fewer blanket requirements, more risk-based judgment and a sharper focus on material exposures.

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