© Z/Yen Group 2012 Z/Yen Group Limited Risk/Reward Managers 90 Basinghall Street London EC2V 5AY United Kingdom tel: +44 (20) “When would we know our financial system is working?” Financial Centre Futures “In Safe Hands? The Future of Financial Services”

© Z/Yen Group 2012 Mark Yeandle Project Manager, Financial Centre Futures Welcome

© Z/Yen Group 2012 About Long Finance ‘When would we know our financial system is working?’ Objectives:  Expand Frontiers  Change Systems  Deliver Services  Build Communities Programmes:  London Accord  Financial Centres Futures  Meta-Commerce  Eternal Coin

© Z/Yen Group 2012 Financial Centre Futures ♦Initiating discussion on the changing landscape of global finance ♦ GFCI launched in 2007 ♦ Over 1,800 respondents in financial services across the world ♦ Sponsored since 2010 by Qatar Financial Centre Authority Long Finance Programmes London Accord Meta-Commerce Eternal Coin

© Z/Yen Group 2012 Gill Ringland Author of “In Safe Hands? The Future of Financial Services” Presentation

6

Background –Long Finance and L3F Global 2050 –What we can forecast Uncertainties –What paradigm changes can we envisage? –Forecasts and scenarios Four scenarios –How might the world be? Financial services –What institutions will there be and what will they provide? 7

8 Long Finance Forum of Futurists (L3F) –Supported by Long Finance community –Project to develop rounded views of the future of financial services (FS) –Initial concept developed by L3F group –Scenarios developed by SAMI –Fleshed out and tested through open events at London Guildhall and Barnard’s Inn –Drafts of the report critiqued by Long Finance Kitchen Cabinet –Thank you! to the many contributors

TIME PROMINENCE OF DRIVER NOW LOOKING AHEAD DISTANT FUTURE Horizon 1: Analysis Horizon 3: Imagination Horizon 2: Exploration

Global population will grow to 9 BN and get older –Most of the additional people in Africa and Asia –Turbulence as the world rebalances to new centres of economic power New centres may not share the value systems of the West, or the Washington consensus –Washington consensus describes economic policy prescriptions for a market economy Technology (info, cogno, bio, nano) will continue to introduce changes in personal capacity and lifestyles Ecological, energy and environmental limits tested or breached –Population increases –Population lives in cities (70% by 2050) –New middle class uses electricity, travel, eats meat 11

Will our economy and society be similar to now? –Will it implicitly follow the Washington consensus –or –Will there be a new paradigm? Does geography matter? –If geography does matter, what sort of new paradigm might there be? City states? –or –If geography does not matter, will markets be global and so largely virtual? Based on affinity groups? 12

13 Today Trends  Scenarios explore the range Of uncertainties Timing ? Forecasts are over-precise

Community based Washington consensus Virtual connections Geography matters Long HandMany Hands Second Hand Visible Hand 14

Capitalism, nation states, democracy and western value systems still dominant as concepts, –though not all countries/regions are moving to embrace these Nearest to current paradigm but –Degradation of state capability –Technology has fed the population Systems in constant crisis –But no new ways forward –International institutions stagger on 15

Capitalism, democracy and western values still dominant –Significant stand-outs and international tensions –Global markets –National governments in retreat Evolution of Washington consensus –Rethinking of taxation & pensions –Food revolution successful –ICT underpins all Lack of diversity leads to break down by 2030 –Inability to handle systemic volatility –Break down of international institutions 16

A crisis has caused the breakdown of the Washington consensus Society has re-formed around affinity groups –Multiple value systems accommodated –Democracy not seen as universal good –Complex arrangements of nation states and communities of affinity groups How do international issues get addressed –eg regulation –eg systemic challenges? 17

A crisis has caused the breakdown of the Washington consensus Society has re-formed around city states –Cities as wealth clusters “brands” –Failure of nation states –Democracy, capitalism and western values competing with other organising concepts, UN etc disappear Global commons abandoned –Conflicts in values, fewer implicit norms 18

Older population –Risk averse Changing balance of power –Globally away from West –From country to cities Impact of ICT –Reduce size of FS sector –Insurance declines –Retail banking automated Environmental and natural resources –FS sought to shelter from volatility of natural systems 19

Ecology of FS more diverse than in 2010 Investment across regions to shelter from volatility Ageing society means –Pensions and security an emphasis –Private insurance sought but often impractical Commodities and equity trading reduced –Fewer larger corporates Singapore the most powerful FS hub 20

Has disappeared by 2050: replaced by –Long Hand if military and civil insecurity the main driver –Many Hands if cyber-security the main perceived threat 21

50 or so loosely coupled transnational systems with diverse regulatory regimes Investment outside “home” group discouraged –Implications for traders Affinity groups across geographies –Retail banking through “intelligent Financial Advisors” Trust within affinity group London and New York pre-eminent FS hubs due to diverse resident communities 22

50 or so loosely coupled city states with diverse regulatory regimes Investment outside “home” city state discouraged –Implications for traders Concern in wealthy city states around –pensions and security of supply of resources Trust within geography –Retail banking between individuals within city states No mechanism for handling global risk 5 pre-eminent FS hubs including Istanbul 23

By 2050 –Shrinkage of FS sector due to ICT –Insurance basis in question due to ICT –FS role in dealing with resources shortages Second Hand –It may be as good as it gets! Visible Hand –Homogeneity cause of volatility and break down Long Hand –Best for London as FS hub Many Hands –How real this one feels. 24

25 The full Report “In Safe Hands? The Future of Financial Services” is available in pdf on the Long Finance web site and the SAMI web site Members of L3F are happy to work with organisations through workshops or consultancy based on these scenarios. For this, or any other query, contact us at SAMI runs training on Futures on behalf of the Foresight Unit: for details see the SAMI web site. SAMI also circulates a monthly e- newsletter - to sign up please give me your business card.

© Z/Yen Group 2012 Panellists: Paul Moxey, ACCA John Grout, ACT Gill Ringland, SAMI Consulting Professor Michael Mainelli (chair) Open Discussion

© Z/Yen Group 2012 Professor Michael Mainelli Principal Advisor, Long Finance Closing Remarks

© Z/Yen Group 2012 Outlook 2012 ♦Publications  Financial Centre Futures – “GFCI 11”  Financial Centre Futures – “Survival of the Fittest: Asset Management Shifts and Global Financial Centres” ♦Events  Meta-Commerce colloquy - tbc  Long Finance Spring Conference – “Into the Folly of Value: Reforming Sustainable Finance” – 1 March 2012  Long Finance Autumn Conference with UCL – 19 October

© Z/Yen Group 2012 Thanks To Our Sponsors