Over 40 senior representatives of the British and Swiss financial services industries met at Mansion House in London for the third Financial Round Table hosted this year by the Lord Mayor of the City of London on 13 June 2008.
Senior representatives of the central banks of both countries as well as their respective financial supervisory authorities also attended the meeting which this year focused on two subjects: the financial crisis and sovereign wealth funds.
Keynote speakers on the credit crisis at this year’s Round Table included Sir John Gieve, Deputy Governor of the Bank of England, Professor Thomas Jordan, Member of the Governing Board of the Swiss National Bank, Dr. Eugen Haltiner, Chairman of the Swiss Federal Banking Commission and Verena Ross, Director of the Financial Services Authority’s Strategy and Risk Division. The debate was chaired by Sir Nigel Wicks.
The first round of discussions examined the credit crisis and the challenges it presents for the supervisory authorities. Participants agreed on the importance of restoring market transparency and liquidity and of regulatory bodies reacting in a measured way.
“The past year has been a prime example of how events in one country can rapidly impact on all of the main financial centres across the globe. Regulation needs to be workable, practical and enforceable, but overall it needs to be proportional, sensible and appropriate. New rules in the major jurisdictions have come into effect this year and its important that regulators continue to work closely with the industry in refining and developing rules that allow global financial services to remain innovative and competitive as well as promoting transparency and trust,” says Angela Knight, chief executive, British Bankers’ Association.
“The analysis and debate of recent world financial events will inevitably go on for decades to come, whether in the media or elsewhere. Inevitably there will be different opinions, but we now need to focus our efforts on bringing confidence back to the markets. Everybody has their part to play whether they are a financial institution, a central bank or a regulator. Politics and protectionism should give way to the development of sound commercial practices that promote both competition and prosperity,” says Pierre Mirabaud, chairman, Swiss Bankers Association.
Key points:
Bringing confidence back to the markets is a key task for all stakeholders. Market liquidity and credit intermediation will start returning to normal levels once confidence in the creditworthiness and strength of banks and other financial institutions is rebuilt. Restoring confidence has to be a collective endeavour, with every stakeholder (i.e. financial institutions, central banks, policy makers, supervisors, credit rating agencies, even investors) playing a part in their respective field of expertise.
With regard to sovereign wealth funds, participants agreed on the need for a liberal approach.
The British Bankers’ Association and the Swiss Bankers Association support a free market approach to potential investment by foreign sovereign wealth funds (SWFs) and see no need for specific legislative action. SWFs have become important investors and tend to operate globally and with a long time horizon. Provided that they are commercially rather than politically motivated, flows of capital surpluses from emerging and developing countries promote competition and prosperity in both SWF home and host countries.
An open investment environment is compatible with policies that address regulatory/prudential, competition and national security concerns. National banking law and competition law should assuage any concerns in the area of potential abuses of market position. The BBA and SBA both support international efforts aiming to increase the transparency of SWFs if they contribute to the free flow of cross-border investment, to open and stable financial systems, and to combating the risk of protectionism.