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Financial markets: the end of globalization?

June 02, 22:01 UTC+3
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KEY CONCLUSIONS:

  • Globalisation is set to continue largely driven by IT development

“Obviously globalisation has not come to an end <...>. We will see a lot more globalisation or trade in terms of services and data flows. I think we will see this continuing,” said Hans-Paul Buerkner, Chairman, The Boston Consulting Group.

“IT technologies will find their way, be it in the form of cryptocurrencies, bitcoins, simply through disintermediation and creation of a virtual environment with no borders,” said Alexander Afanasiev, Chairman of the Executive Board, Moscow Exchange.

“There is a clear trend that globalisation will also happen in the future <...> because also young people want to communicate internationally, they want to share services, they want to share information,” said Christian Sewing, President, Head of Private and Commercial Bank (including Postbank), Deutsche Bank AG.

  • New opportunities trigger changes in the global market

“For the first time since 2008, the regulators are taking real action to harmonise financial market rules through the G20’s Financial Stability Board”, said Sergey Shvetsov, First Deputy Governor, Central Bank of the Russian Federation.

“The share of top exchanges is going down, the more so the share of the 30 to 50 from the bottom. <...> New large regional players are emerging to drive the globalisation, although more on the regional level. They are part of the stock exchange elite,” added Alexander Afanasiev.

“The trend we are witnessing is that China is gradually opening up in terms of the debt and equity markets <...>. China’s government works hard to lure foreign issuers into its debt market. This is an important trend not to be missed,” said Oleg Mukhamedshin, Deputy Chief Executive Officer, Director for Strategy, Business Development and Financial Markets, RUSAL.

CHALLENGES:

  • Threat of job losses and higher competition

“The next thing to blame for people losing jobs will be automation, robotics, digitalisation,” said Christian Keller.

“We have to understand that competition will be getting more intense and that there is no more such thing as a national capital, we could build any barriers whatsoever, but the capital has become global,” said Sergey Shvetsov.

“The market will change dramatically, business models will transform, new intermediaries will appear, financial supermarkets, bots <...> roboadvising,” added Sergey Shvetsov.

  • New shadow schemes and cyber crime require new regulation approaches

“I think we’ll see also a lot of problems, we’ll see a lot of fraud. <...> While there is a huge euphoria at the moment, we’ll also see a clean-up over the coming years because many of those fintechs and technologies will not be viable <...> and actually many of the schemes will be quite fraudulent. I think <...> it will probably take another significant crisis,” said Hans-Paul Buerkner.

“There is a broad range of shadow banks in different countries <...> under similar or same regulations as the established banks. <...> [They] just finance loss-making [businesses] just to collect a lot of deposits at somewhat higher interest rates. <...> The regulators are somewhat behind the crowdfunding development, and that, I think, will require significant efforts going forward,” said Hans-Paul Buerkner.

“What is important? For the jurisdictions to be able to use these technologies <...> No one understands what a blockchain statement is like <...> How can courts make judgments about errors then? Are they going to penalise blockchain, or who? <...> Our legal framework doesn’t understand what blockchain is,” said Sergey Shvetsov.

“Our market is less developed, and by toughening the regulations <...> we only constrain the underdeveloped financial market. Our legislation lags behind global jurisdictions,” said Anatoly Aksakov, Chairman, State Duma Committee on Financial Markets.

SOLUTIONS:

  • Offering investors a favourable environment

“We need to offer a good investment climate because the capital will be flowing to where the environment is safe and beneficial for it. In terms of benefits, we are OK <...> but in terms of safety there’s still quite a lot to be done, we need reliable laws,” said Sergey Shvetsov.

“We will see longer-term capital coming in if there is an internal market and internal investors <...> upon the whole, the financial market will be more сompetitive, and an inflow of foreign cash will become more stable,” said Alexey Yakovitskiy, Global Chief Executive Officer, VTB Capital Holding.

“It will be really important for established financial institutions to adapt and adopt new technologies, and <...> use their brand names to strengthen their position rather than leave the markets and the customers to new entries who do not have to deal with all the legacy issues that financial institutions have to deal with <...> They also need the people. I think what we see at the moment is that many financial institutions have difficulties attracting the talent,” said Hans-Paul Buerkner.

“My only issue is <...> when these fintechs turn more financial and want to have direct customer access, that’s exactly what they want. Then we need a level playing field in regulation,” said Christian Sewing.

“We should do our best to ensure more deregulation, to faster get in line with what is happening in Europe or the US <...> to introduce less burdensome rules for issuers and investors,” said Anatoly Aksakov.

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