Finance 2019

Backing the future World Commerce Review sat down with Simon Gray to discuss the role of the British Virgin Islands in keeping the wheels of global trade and investment turning Financial innovation for inclusive growth The benefits of financial innovation should be available for all. Luis de Guindos outlines a European approach that is fit for the global challenges ahead A major step toward combating money laundering Combating money laundering in Europe took a momentous step with finance ministers putting forward a joint proposal. Nicolas Véron and Joshua Kirschenbaum say that this paves the way for strong EU legislation The future of the euro area economy Europe needs to strengthen common institutions and empower the European economy to respond to today’s challenges, says Christine Lagarde. This would be a game changer for Europe’s stability and prosperity and for that of the global economy, too Limits of the ‘Brussels effect’ The EU model of financial market regulation is increasingly copied by third countries. Alexander Lehmann considers bank regulation in the European Union neighbourhood Anti-money laundering and combating the financing of terrorism AML and CFT are high on the agenda of policymakers at both the European and global levels. Yves Mersch considers recent initiatives and the role of the ECB A challenging path ahead Reuben Borg, Marco Buti, Oliver Dieckmann, Björn Döhring, and Alexandru Zeana consider the European Commission’s Autumn 2019 forecast A digital euro to save EMU Relaunching the euro as digital central bank currency could help reduce the debt of the euro states and end the sovereign-bank doom loop, Thomas Mayer argues Monetary policy and open questions in international macroeconomics Silvana Tenreyro considers some long-term issues in the global economy, focusing on three ideas that have dominated the policy and academic debate in the years since the 2008 financial crisis The world turned upside down Little has changed since the 2008 financial crisis. Mervyn King considers economic policy in turbulent times, and argues that the global economy needs to reform Synchronized slowdown, precarious outlook The global outlook remains precarious. Gita Gopinath believes that countries need to work together because multilateralism remains the only solution to tackling major issues Digital currencies, stablecoins and the evolving payments landscape Lael Brainard considers the history of technological advances challenging what money is, and looks at the next chapter in the payments landscape The international role of the euro The euro is 20 years old. Poul Thomsen considers what can be done to further strengthen the role of the euro as an international reserve currency Payments: a platform for innovation Victoria Cleland writes about the work of the Banking, Payments and Innovation team at the Bank of England, in particular looking at what they are doing in response to the recommendations of the Future of Finance report TCFD: strengthening the foundations of sustainable finance Mark Carney says the financial sector must help the transition to ‘net zero’ (a neutral carbon footprint). Businesses need to keep improving their disclosure of climate risks The FSB at 10 years—looking back and looking ahead Randal Quarles considers the success of the FSB and looks ahead to the new challenges, such as fintech, shifts in financial globalization and integration, and increasing nonbank financial intermediation How to stabilise the euro area We need more supportive fiscal policy alongside monetary policy for a faster return to price stability with fewer side effects, says Mario Draghi. Acting too late leads to a longer period of accommodative policies The emergence of big tech in financial intermediation Big tech firms are entering finance. Jon Frost, Leonardo Gambacorta, Yi Huang, Hyun Song Shin and Pablo Zbinden assess the economic forces behind the adoption of big tech services in finance Libra paves the way for central bank digital currency Dirk Niepelt argues that while we may be witnessing a seismic shift in the monetary system, Libra’s role in that shift will be an indirect one Hybrid and cybersecurity threats Maria Demertzis and Guntram Wolff find that EU finance ministers should advance a broader political discussion on the integration of the EU security architecture applicable to the financial system Money and private currencies: reflections on Libra The link between money and trust has lost none of its relevance. Yves Mersch considers Libra and calls for a global regulatory and supervisory response to mitigate risks The rise of digital currency Digital payments can bring significant benefits to customers and society. Tobias Adrian and Tommaso Mancini-Griffoli argue that accompanying risks should also be tackled Challenges for monetary policy The US economy is in a favourable place. Jerome Powell describes how the Fed is working to sustain these conditions in the face of significant risks The benefits of a global digital currency There have been negative reactions to the Libra cryptocurrency. Antonio Fatás and Beatrice Weder di Mauro argue that whilst a digital currency provided by central banks may be preferable, a private version would offer similar benefits The growing challenges for monetary policy Mark Carney considers the challenges posed by the international monetary and financial system for the conduct of monetary policy across the world The structure of global trade finance Banking and liquidity problems can have far-reaching consequences on global trade. Olivier Accominotti and Stefano Ugolini take a very long-run view and reconstruct the evolution of trade finance Who are you going to believe, me or the evidence of your own eyes? Joseph Stiglitz, Martine Durand and Jean-Paul Fitoussi argue that if experts are perceived as wrong it’s inevitable that they stop believing them, and the politicians they advise, and look for answers elsewhere Productivity and competitiveness in the euro area: a view from France Agnès Bénassy-Quéré et al explain why current account imbalances in the euro area are both a sign of deficient adjustment mechanisms and a cause of concern Possible risks in Facebook’s pursuit of a ‘stablecoin’ Facebook’s new cryptocurrency has the potential to be attractive to those countries that do not have strong sovereign currencies. Maria Demertzis and Jan Mazza write that regulators have so far treated cryptocurrencies as a minor risk to national economics, but Libra could change everything The incoming payment revolution and the future of central banking Maylis Avaro and Vincent Bignon consider the lessons from the history of the Banque de France on financial instability and the payment revolution Managing machines: the governance of AI Technology is shaping a new economy powered by big data and advanced analytics. Financial firms have to understand the implications for governance in order to identify and manage the associated risks. James Proudman gives three principles firms can use when they’re thinking about how to do this Sound at last? Assessing a decade of financial regulation Bolton et al argue that despite clear improvements in financial regulation and supervision since the global financial crisis, there is still work to do in several crucial areas and political constraints may bite Open banking: threat or opportunity? Redefining banking in a financial services market where your biggest competitor may be Amazon or Google, not a traditional bank, is a real threat to the incumbents. Tiffany Carpenter considers the options The cost of the Brexit vote The latest OECD data suggests that the cost of Brexit has been £350 million a week since the referendum. Benjamin Born, Gernot Müller, Moritz Schularick and Petr Sedláček examine the future consequences The rise of services and the transmission of monetary policy The shift of production and consumption away from goods and towards services helps explain why inflation in advanced economies is responding more slowly to monetary policy than it did a few decades ago, says Benoît Cœuré Creating stability Peter Praet discusses the importance of institutions as provider of stability and protection in an uncertain world Stablecoins, central bank digital currencies, and cross-border payments Digital currencies are growing rapidly. Tobias Adrian considers the implications and what the future holds for the international monetary system Evolution or revolution: an afterword After the Great Recession Olivier Blanchard and Lawrence Summers believe that a major rethinking of macroeconomic and fiscal policy is in order Cyber resilience as a global public good First principles recognise cyber resilience for what it is, a global public good. Benoît Cœuré considers international cooperation and shares his thoughts on how cooperation can work both from the top down and from the bottom up Euro area growth continues at a more moderate pace Marco Buti et al introduce the European Commission’s Spring 2019 Forecast, consider the growth prospects for Europe and examine the relative impact of cyclical patterns and shocks, external and domestic Financial stability post Brexit: risks from global debt Jon Cunliffe examines current risks to UK financial stability. First he looks at the risks that may arise from Brexit. Then, he considers the wider financial stability environment. And, in particular, global debt levels How to ensure effective sustainable financing of international development The world is committed to the development of low-income countries. Christine Lagarde considers the obstacles that must be overcome Making Basel III work for emerging markets Thorsten Beck and Liliana Rojas-Suarez assess the implications of Basel III for EMDEs and provides recommendations for policymakers to make Basel III work for these economies What reforms are still needed, and why? In January 2018 CEPR published a Policy Insight recommending euro area reforms. Agnès Bénassy-Quéré et al identify priorities that should be at the centre of discussions on euro area architecture The market is betting on climate change Wolfram Schlenker and Charles Taylor look at weather derivatives in financial markets to assess beliefs about climate. They find that traders have been pricing in a warming trend that is closely aligned with the projections of scientific climate models Embracing fintech Fintech could transform the structure of the financial sector. Dave Ramsden sets out three ways the Bank of England is using the latest innovations in finance and technology A platform for innovation Mark Carney highlights the opportunities offered by innovation in the financial services. He says we’re moving to a new kind of economy, which needs new kinds of financial services for individuals and businesses Greening monetary policy The EU is committed to a low-carbon economy. Dirk Schoenmaker believes that the transition could be accelerated by tweaking the Eurosystem's allocation of capital Avoiding the storm: climate change and the financial system Climate change poses significant risks to the economy and to the financial system, Sarah Breeden asserts, and calls for action today Reforming the global reserve system The IMF will turn 75 next year. José Antonio Ocampo believes updating and reforming some aspects of its core functions should be considered The euro area: creating a stronger economic ecosystem Europe has been slow to produce a fully developed financial ecosystem. Christine Lagarde argues that the time is ripe for the euro area to show new resolve and complete the banking and capital markets unions A new horizon The building blocks for a transition to a low-carbon economy are being put in place. Mark Carney believes further progress will be driven by coherent government policies Regulating fintech: ignore, duck type, or code Regulation of fintech is still in its early stages. Marlene Amstad considers the ongoing policy deabte No deal is the best deal for Britain Patrick Minford considers the options for the UK as they reach the endgame in their negotiations with the EU, and finds that a No Deal Brexit is a recipe for economic success Sovereignty in a globalised world Countries need to work together to exercise sovereignty in a globalised world, says Mario Draghi. EU membership helps countries withstand external pressures and achieve policy goals they could not realise alone The European Union and money laundering Money laundering scandals at EU banks have become pervasive. Joshua Kirschenbaum and Nicolas Véron detail the current AML architecture’s fundamental weaknesses and propose a new framework Should the ECB care about the euro’s global role? Are recent shifts in global governance a reason to strengthen the global role of the euro? Benoît Cœuré argues that policies that make the euro more robust make the debate relevant to the ECB Global economy threatened by ‘sustainable’ investments Governments are pressuring portfolio managers to invest their clients’ funds in sustainables. Martin Hutchinson critically examines the arguments made in favour of investing in sustainables Universal basic income and the Finnish experiment Catarina Midoes examines the preliminary results on the Universal Basic Income experiment in Finland, and what they mean for the long-standing questions over the potential impact of UBI in developed countries The euro – a tale of 20 years The financial crisis has laid bare the weaknesses. Marco Buti, Maya Jollès, and Matteo Salto consider the priorities going forward to complete the EMU Risks to banks – from inside and out Banks have become more resilient, but they still face a number of risks and challenges. Sabine Lautenschläger says plenty of work still lies ahead for banks and supervisors Reining in shadow banking Leveraged finance is booming, and the central banks are bystanders. Dirk Schoenmaker argues that there are unused regulatory powers that could yet rein in unsustainable levels of leveraged finance The euro: from monetary independence to monetary sovereignty The euro is the second-most important global currency. Lourdes Acedo Montoya and Marco Buti argue that Europe should boost the international role of the euro Options for Greek bank restructuring After the ESM programme authorities can now consider the legacy of NPLs and private sector debt. Alexander Lehmann looks at the options A European fiscal capacity can improve stabilisation The architecture of the euro area remains incomplete. Jan Stráský and Guillaume Claveres argue that fiscal risk sharing can avoid permanent transfers EU budget implications of a no-deal Brexit A no-deal Brexit would mean the UK’s contributions to the EU budget fall to zero. Zsolt Darvas calculates the estimated budget shortfall and how the burden would fall across different member states Europe and the euro 20 years on We should consider the gains made as a result of having one market with one money, says Mario Draghi, outlining how the Single Market has benefited the people of Europe over the past 20 years The economics of cryptocurrency pump and dump schemes Hamrick et al highlight the need for concerted efforts from industry and regulators to fight cryptocurrency price manipulation