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© 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali.

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Presentation on theme: "© 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali."— Presentation transcript:

1 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 1 E-finance & development: policy issues John Hawkins Bank for International Settlements* Presentation to UNCTAD event on “E- finance for development” 19 March 2002, Monterrey, Mexico *Opinions expressed in this paper are not necessarily shared by the BIS

2 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 2 Internet usage in 2000

3 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 3 Mobile phone and internet penetration in 2000

4 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 4 Digital divide – between countries – within countries

5 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 5 Payments issues e-money personal online payments

6 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 6 Challenges for supervisors internet-only banks? “clicks and mortar” competitors (eg telecoms) new business models (eg aggregators) operational risk (eg outsourcing) cross-border issues uncertainty

7 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 7 Trading in traditional markets

8 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 8

9 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 9 * * as e-trading has no physical marketplace

10 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 10 Electronic trading a)Fragmentation and consolidation fragmentation through new venues links between markets (or search agents) centralising previously OTC markets need to understand NETWORK ECONOMICS

11 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 11 Electronic trading b)Market access simultaneous interaction (floor) decentralised (telephone) access in now a matter of choice still role for dealers both (electronic)

12 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 12 Electronic trading c)Transparency electronic trading potentially much more transparent but will this be realised? and is it always desirable [means, not end]

13 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 13 Electronic trading d)Trading costs electronic trading lowers costs (  30%) Explicit costs big gains STP the key Implicit costs bid-ask spreads lower market impact costs may be lower

14 © 2001 Bank for International Settlements BIS-BRI-BIZ Bank for International Settlements Banque des Règlements Internationaux Banca dei Regolamenti Internazionali Bank für Internationalen Zahlungsausgleich 14 Further reading “Electronic finance”, BIS Papers 7, Nov 2001, (www.bis.org) “E-finance in emerging markets”, World Bank Financial Sector Discussion Paper 4, June 2001, (www.worldbank.org) “Electronic trading in wholesale financial markets”, Bank of England Quarterly Bulletin, March 2002, (www.bankofengland.co.uk)


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