JOIN THE CONVERSATION: #FUTUREOFFINANCE
The global financial landscape has changed significantly over the past decade. In the future, several trends will transform financial systems still further. Population aging, climate change, increasing credit intermediation through nonfinancial firms, and changes in global economic integration will continue to shape the future of finance. What would this future look like? How can policymakers and financial institutions best deal with these changes and help improve economic outcomes while adequately safeguarding the stability of the financial system? The panelists will discuss the challenges and opportunities that policymakers and financial institutions would face during the transformation of finance going forward.
Moderator: Linda Yueh, Professor, London Business School
Panelists:
David Lipton, First Deputy Managing Director, IMF
Karnit Flug, Governor, Bank of Israel
Alicia Garcia Herrero, Senior Fellow Bruegel
Ryozo Himino, Vice Commissioner for International Affairs, Financial Services Agency, Japan
Davide Serra, Founder and CEO, Algebris Investments
The global financial landscape has changed significantly over the past decade. In the future, several trends will transform financial systems still further. Population aging, climate change, increasing credit intermediation through nonfinancial firms, and changes in global economic integration will continue to shape the future of finance. What would this future look like? How can policymakers and financial institutions best deal with these changes and help improve economic outcomes while adequately safeguarding the stability of the financial system? Panelists discussed the challenges and opportunities that policymakers and financial institutions would face during the transformation of finance going forward.
Key Points:
· An evolving system. Lipton remarked that the global financial crisis taught us that the banking system was too big and under-supervised. Today, non-bank financial institutions represent the same risks, and technological change is affecting both banks and non-banks. Flug noted that the evolving system is less bank-dominated, and regulations have not caught up to the variety of services being offered. Serra noted that the banking system is much safer now, and could withstand a $2-3 trillion dollar shock. Garciawondered if we are heading toward financial integration or disintegration, and Himino suggested some disintegration of the system may be necessary before the system is re-integrated.
· Challenges and solutions. Himino noted that populations are aging more rapidly in EMDCs than in advanced economies, and that by 2035, 50 percent of household financial holdings could be in the hands of someone with dementia. In addition, a digital divide excludes aging populations. Flug suggested more efforts to guide older populations to digital access. Serra noted that 80 percent of global savings are held in established Anglo-Saxon institutions, and rating agencies have too much power in deciding access to credit. Such concentration of power could result in arbitrary rules for investors. Lipton believed that regulatory arbitrage would take care of any uneven playing field between old and new institutions. If you act like a bank, you have to be regulated like a bank.
· Risk aversion. Flug asserted that the best way to deal with risk is to embrace new technology and gain the expertise necessary to regulate it well. Some new players had not survived a full economic cycle yet, and it would be helpful to see how they manage a downturn. Coordinating bodies should look at the system as a whole rather than worry over the categories of institutions. Liptonsuggested allowing experimentation within a framework of more international coordination. Some parts of the world will be willing to experiment more, which will likely result in fragmented growth.
· Going forward. Serra suggested that creditors and investors should depend on their own risk analysis instead of relying on rating agencies. Garcia called for strong efforts to avoid financial disintegration. Himino considered rising debt to households, corporations, and governments as the biggest financial stability problem. Lipton cited the importance of institutions for multilateral coordination to mitigate fragmented policy responses to new frontiers.
Quotes:
“Various standard setters are doing their work…but there is nobody to put together all those pieces in a consistent package.” Ryozo Himino
“We know that some banks were too big to fail, but now we have a cloud that may be too big to fail…the new internet platform firms are becoming financial firms.” David Lipton
“The way to deal with the risks is not by holding back on the adoption of technology.” Karnit Flug
Contributor: Aric Maiden
Linda Yueh |
Professor, London Business School
|
Dr. Linda Yueh is Fellow in Economics, St Edmund Hall, University of Oxford and Adjunct Professor of Economics, London Business School. She is Visiting Senior Fellow at the IDEAS research centreat the London School of Economics and Political Science and was Visiting Professor of Economics at Peking University. She is Editor of the Routledge Series on Economic Growth and Development, and her books include: The Great Economists: How Their Ideas Can Help Us Today (What Would the Great Economists Do? How Twelve Brilliant Minds Would Solve Today’s Biggest Problems) and China’s Growth: The Making of an Economic Superpower.
David Lipton |
First Deputy Managing Director, IMF |
Mr. David Lipton assumed the position of First Deputy Managing Director of the International Monetary Fund on September 1, 2011. On March 28, 2016, Mr. Lipton was reappointed for a second five-year term beginning September 1, 2016.
Before coming to the Fund, Mr. Lipton was Special Assistant to the President, and served as Senior Director for International Economic Affairs at the National Economic Council and National Security Council at the White House.
Previously, Lipton was a Managing Director at Citi, where he was Head of Global Country Risk Management. In that capacity, he chaired Citi’s Country Risk Committee, worked for the Senior Risk Officer, and advised senior management on global risk issues.
Karnit Flug |
Governor, Bank of Israel |
Dr. Karnit Flug was appointed Governor of the Bank of Israel in November 2013.
Dr. Flug holds a Ph.D. in Economics from Columbia University, a Masters and a Bachelor’s degree (cum laude) in Economics from the Hebrew University.
Prior to her current role, she held the positions of Deputy Governor, Acting Governor, Director of the Research Department and member of the Bank of Israel's senior management.
Earlier in her career, Dr. Flug worked as an economist at the International Monetary Fund and was a senior research economist at the Inter-American Development Bank.
Dr. Flug published numerous papers on macroeconomics, the labor market and social policies.
Alicia Garcia Herrero |
Senior Fellow Bruegel |
Alicia García Herrero is the Chief Economist for Asia Pacific at Natixis. She also serves as Senior Fellow at European think-tank BRUEGEL and Research Fellow at Real Instituto Elcano, and is currently Adjunct Professor at the Hong Kong University of Science and Technology. Finally, Alicia is advisor to the Hong Kong Monetary Authority’s research arm (HKIMR) and the Asian Development Bank (ADB) as well as a member of the board of the Hong Kong Forum.
Alicia holds a PhD in Economics from George Washington University and has published extensively in refereed journals and books (see her publications in ResearchGate or Google Scholar. Alicia is also very active in international media (Bloomberg and CNBC among others) as well as social media (Twitter, LinkedIn and Weibo). As recognition of her leadership thoughts, Alicia has recently been nominated TOP Voices in Economy and Finance by LinkedIn.
Ryozo Himino |
Vice Commissioner for International Affairs, Financial Services Agency, Japan |
Ryozo Himino is the vice minister for international affairs of the Financial Services Agency. During the last two decades, he assumed various posts at the agency and supervised banks, insurance companies, broker dealers and audit firms and regulated capital markets. He also served as the secretary general of the BCBS and chaired IOSCO Asia Pacific Regional Committee and the IFRS Foundation Monitoring Board. Ryozo published in Japanese a biography of the French sculptor Aristide Maillol and a book applying the Chinese Book of Fortunes to Sophocles’ tragedies. He graduated from the University of Tokyo (LL.M.) and the Harvard Business School (MBA).
Davide Serra |
Founder and CEO, Algebris Investments
|
Davide Serra is the Founder and CEO of Algebris Investments, a global asset management boutique that manages Credit, Equity and Non-Performing Loans, with a focus on Global Financials. Founded in 2006, Algebris manages $13.5bn of assets and maintains offices in London, Boston, Singapore, Luxembourg, Milan and Tokyo. Davide is recognized as one of the world's leading experts on financial services and is often consulted by central bankers and regulators on policy matters. He has been awarded the Commendatore designation, a decoration of the Order of Merit of the Italian Republic. Davide is a graduate cum laude of Bocconi University in Milan, Italy and holds a Master CEMS. He played volleyball professionally in Italy from 1985 until 1990 and reached Series A1 and is a keen alpinist.