Innovation and Regulation: What Inspiration for Europe and Japan?
Illustrative Cases: Accounting Framework
INTRODUCTION
• GLOBALISATION IS A REALITY, IT IS A SOURCE OF GROWTH FOR THE WORLD
• THE CRISIS IS NOT JUST THE RESULT OF AN ECONOMICAL CYCLE, IT TRIGGERS:
- A NEW GOVERNANCE MODEL FOR THE WORLD
- A NEW FINANCING MODEL vs REAL ECONOMY
TO FACE THIS REALITY OUR INDUSTRY NEED:
INNOVATION
« SMART » REGULATION
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I- GOVERNANCE ISSUES /: A MULIPOLAR DIVERSIFIED WORLD
G20 Pinciples
3
US
CROSS BORDER CROSS BORDEREU
ASIA
OTHERS…
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COMPATIBILITY HARMONISATION
2ITS BACKBONE:- GOUVERNANCE- SINGLE RULEBOOK- REGULATION COMMUNE AUTORITES (ERA) + ECB- RESEAU DES CENTRES FINANCIERS- INFRACTRUCURES DU MARCHE COMMUN. PAIEMENTS. CSD. CCP. ECHANGES
Critical mass +competitiveness
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A TOP DOWN COHERENT GOVERNANCE FROM G20 to INSTITUTIONG 20
FSB
FMIBANQUE MONDIALE IOSCO
CE
ESB
BCE
ESMAEBA EIOPATRESOR
BDFACP AMF
CONSEIL D’ADMINISTRATION
COMITÉ DES RISQUES
DIRECTION DES RISQUES
DIRECTION OPÉRATIONNELLE
PRINCIPLES WORLD
CONTROL TOWER « TOOLS »
REGION ASEAN / EUROPEAN Framework
EU « Banking Union »REGULATORS
NATION LEGAL / TAX Framework
Local supervision
INSTITUTIONRisk culture / manegement
A Robust risk chain from top to bottom -Risk appetite-Risk coverage-Risk monitoring
THE RISK CHALLENGE vs INNOVATION
• COMPLEXITY IS A GIVEN IN MODERN SOCIETIES : IT WILL INCREASE THROUGH TECHNOLOGY AND GLOBALISATION
• FINANCIAL INDUSTRY’S MISSION HELP THE REAL ECONOMY TO HEDGE RISK
• YESTERDAY’S PARADIGM: COMPLEXITY COMPLEX FINANCE PRODUCTS
EXPLOSION & VICIOUS INTERMEDIATION
• POST-CRISIS PARADIGM: COMPLEXITY SIMPLICITY (+TRANSPARENCY)
VIRTUOUS INTERMEDIATION more research & innovation5March 30, 2012
THE RISK MACRO HEDGING CURVE
THE RISK HEDGING TUNNEL •MACRO PRUDENTIAL SURVEILLANCE•BANKING STRUCTURES + RESOLUTION PLAN•MARKET STRUCTURES REGULATED OTC BASED ON LEVEL OF LIQUIDITY•ACCOUNTING RULES
SOCIETAL COMPLEXITY =
RISK
SOCIETAL COMPLEXITY =
RISK
HOW TO FOLLOW THE CURVE ?HOW TO MAKE THE NEXT CRISIS LESS PAINFUL OR SYSTEMIC
HOW TO FOLLOW THE CURVE ?HOW TO MAKE THE NEXT CRISIS LESS PAINFUL OR SYSTEMIC
INNOVATION or NEXT CRISIS ?INNOVATION or NEXT CRISIS ?
6March 30, 2012
II- A NEW FINANCING MODEL FOR THE REAL ECONOMY
• THE B20 RECOMMANDATIONS : priority to growth via SMSs & INFRASTRUCTURES
• WHY TO RECONSIDER POST CRISIS PRIORITIES ?
• AS FOR OTHER INDUSTRIES, WHY INNOVATION IS KEY?
- structural innovation conditions for a robust competitivity
- Strategical innovation what format for the financial industry, robust and safe ? How to optimize capital allocation , prudential vs production? Why universal banking model ?
- Entrepreneurial innovation : clusters & innovative SMEs
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VIRTUOUS BALANCE & CHALLENGE (« 9 » 3+3+3) !
Growth
Stability SolidarityEntreprises
RégulatorCountry 1
« Régulated »
Trust
Savings/ investors
Financial intermediaries
Corporate / SMEs
3
3
3
RégulatorCountry n
Smart reg
Mutual recognition
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FINANCING THE ECONOMY
I/ Investors: deep liquidity
II/ Corporate: value creation
III/ Credit Intermédiation & market risk
« Transformation «
REGULATION
INFRASTRUCTURES
Domestic SavingsGlobal savings - Assets
- Pensions- Deposit
State/ municipalities
locales
Productive assets Prudential assets
Alternativefinance
Regulated Transformation
SUPERVISION
A STOCK EXCHANGE AT THE CENTER
• BLUE CHIPS vs SMEs• PRIMARY vs SECONDARY• CAPITAL FLOW vs LIQUIDITY• EQUITY vs BONDS
• DOMESTIC vs FOREIGN • INDIVIDUALS vs INSTITUTIONS• LT FUNDS vs MUTUAL FUNDS
• DVP • CSD
• RULES• MARKET PRACTICES• SUPERVISION• TECHNOLOGY
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STRUCTURAL CONDITIONS : KEY QUESTIONS
• MARKET STRUCTURE• IS FRAGMENTATION AN ISSUE ? FOR France, YES• REINFORCEMENT OF STOCK EXCHANGES• PROPER BALANCE vs MTF & OTF….
- TRANSPARENCY• PROPER BALANCE vs LIQUIDITY• BUT PROGRESS ARE NEEDED IN POST TRADE EVEN FOR BONDS• INNOVATION in BOND TRADING : A BALLANCED ORDER BOOK for LOW LIQUID
INSTRUMENTS the CASSIOPEA project
- LIQUIDITY / COLLATERAL CHALLENGE
- THE UNIVERSAL BANKING MODEL: WHY IT IS STILL GOOD FOR EUROPE.• THE CRITICAL MASS & COMPETITIVE ISSUE• THE CUSTOMER SERVICE ISSUE• THE PRODUCT ISSUE STONGER LINKS BETWEEN CREDIT & MARKET WORLD, A
COMPLEMENTARY CHAIN OF SERVICES
- IMPROVEMENT OF THE RISK MANAGEMENT CHAINE IS MORE EFFICIENT THAN JUST CAPITAL BUFFERS
WHY ACCOUNTING RULES ARE STRUCTURAL ?
• ACCOUNTING IS ABOUT VALUES = MEASURE OF ECONOMICAL SUCCESS
• IT IS A « TOOL » FOR MULTIPLE PURPOSES - CORPORATE MANAGEMENT- LONG or SHORT TERM INVESTORS- TRADERS- REGULATORS ( PRUDENTIAL)• DEEPLY LINK INTO LOCAL PRACTICE & CULTURE• BUT GLOBALISATION IMPLIES SOME CONVERGENCE• TO FIND A COMPROMISE • IASB CONCEPTUAL CONSULTATION vs EU ACCOUNTING
GOVERNANCE / the « EFRAG » ISSUE
FINALLY TOWARDS A LONG TERM INVESTMENT STRATEGY
• TO REBALANCE SHORT vs LONG TERM HORIZONS• A L T INVESTMENT STRATEGY RAPS UP
COMPETITIVE CONDITIONS FOR THE REAL ECO• A NECESSARY DEFINITION
• INSTRUMENTS : EQUITIES, BONDS….• ENVELOPES: PENSION FUNDS, LIFE INSURANCE,
EMPLOYEES SCHEMES, MUTUAL FUNDS…
- IT IMPLIES ALSO SHORT TERM COMPONENT TO GUARANTEE A FAIR EXIST PRICE AT THE END, AN EFFICIENT MARKET PLACE IS A TRUST COMPONENT & CONDITION….
In EUROPE A GREEN BOOK TO FIX ORIENTATION FOR THE NEXT LEGISLATURE 2014- 2019….