The Financial Times and The Banker presented the second in their series of high-level, strategic briefings focused on International Financial Centres in Hong Kong today.
The event brought together leaders from IFCs together with key figures from banking, asset management, wealth management, insurance in an exclusive forum for debate and discussion on how to grasp the opportunities and meet the challenges of successfully competing in the new global economy.
Asian financial centres are on the rise and are now actively competing with the established economies of the West. The region is ripe with investment opportunities with the IMF predicting that emerging Asia will grow by about 7% per annum over the next five years. As global firms look increasingly to expand their Asian footprint, the event explored how financial centres are responding focusing on service development, regulation and enhanced competitiveness.
It was my pleasure to follow a keynote address by Scotland’s First Minister, Alex Salmond, who is leading a mission to Hong Kong, which has culminated in a partnership agreement being signed on educational cooperation.
My presentation addressed the question: How is increasing regulation impacting on the competitiveness of financial centres?
The presentation is attached and the main thrust of my message focused on the increased regulation arising from the Financial Crisis and the understandable reaction from the political and regulatory communities.
Significant reform has taken place and Jersey has always been in the vanguard of adopting the highest standards of international regulation and good governance, so this was familiar territory.
Stability and the avoidance of tax payer support through the socialising of bank debt has brought wave after wave of reform. But regulation has an opportunity cost, money spent on compliance is not available to give additional customer value, improved customer service, or cheaper products.
Increased capital requirements have constrained lending and support for the real economy, a pause to evaluate desired outcomes and whether a ‘tipping point’ has been reached is merited.
But it can be argued much of the answer lies in the hands of financial institutions themselves, with an onus to rebuild the trust and confidence forfeited as a consequence of the crisis. A focus can helpfully be deployed on good governance, risk management and treating customers fairly.
More transparent products and services, better disclosure of real asset values reflecting impairments where needed, and shunning any gaming of the system are all necessary steps. Aligning corporate goals, individual remuneration and long term client interests are also key.
It is these behaviours that will give governments and regulators the confidence to dial back the pressure to a level which delivers sound regulation that is both appropriate and progressive at the same time, recognising that too great weight of regulation will ultimately hurt consumers more through lost growth and jobs than the protection it affords.
Video from the London event: