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Innovation and Regulation: What Inspiration for Europe and Japan? Illustrative Cases: Accounting Framework.

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Presentation on theme: "Innovation and Regulation: What Inspiration for Europe and Japan? Illustrative Cases: Accounting Framework."— Presentation transcript:

1 Innovation and Regulation: What Inspiration for Europe and Japan? Illustrative Cases: Accounting Framework

2 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

3 3 I- GOVERNANCE ISSUES /: A MULIPOLAR DIVERSIFIED WORLD G20 Pinciples 3 US CROSS BORDER EU ASIA OTHERS… …27 1 COMPATIBILITY HARMONISATION 2 ITS BACKBONE: - GOUVERNANCE - SINGLE RULEBOOK - REGULATION COMMUNE AUTORITES (ERA) + ECB - RESEAU DES CENTRES FINANCIERS - INFRACTRUCURES DU MARCHE COMMUN. PAIEMENTS. CSD. CCP. ECHANGES Critical mass + competitiveness

4 4 A TOP DOWN COHERENT GOVERNANCE FROM G20 to INSTITUTION G 20 FSB FMI BANQUE MONDIALE IOSCO CE ESB BCE ESMA EBA EIOPA TRESOR BDF ACP 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 INSTITUTION Risk culture / manegement A Robust risk chain from top to bottom -Risk appetite -Risk coverage -Risk monitoring

5 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 & innovation 5 March 30, 2012

6 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 COMPLEXI TY = RISK SOCIETAL COMPLEXI TY = 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 ? 6 March 30, 2012

7 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

8 8 VIRTUOUS BALANCE & CHALLENGE (« 9 » 3+3+3) ! Growth Stability Solidarity Entreprises Régulator Country 1 « Régulated » Trust Savings/ investors Financial intermediaries Corporate / SMEs Régulator Country n Smart reg Mutual recognition

9 9 FINANCING THE ECONOMY I/ Investors: deep liquidity II/ Corporate: value creation III/ Credit Intermédiation & market risk « Transformation « REGULATION INFRASTRUCTURES Domestic Savings Global savings - Assets - Pensions - Deposit State/ municipalities locales Productive assetsPrudential assets Alternative finance Regulated Transformation SUPERVISION

10 A STOCK EXCHANGE AT THE CENTER Corporate needs Stock Exchange Investors needs BrokersMI CUSTODIANS Political Authorities Regulators 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 10

11 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

12 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

13 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 ….


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