M. Maurice Button, Président exécutif et fondateur de City & Financial global Ltd.

Économie et Finance

Against protectionism and widespread populism, we need to reinvent a globalization more inclusive

le 10 juin 2019


Interview with Mr. Maurice Button
Chief Executive, City and Financial Global Ltd, organizer of the City Week of London

City & Financial Global Ltd is one of the UK’s leading research-based conference companies specialising in high-level international conferences in the fields of Finance, Fintech, Cyber-finance and risk management to name a few.

It is the organizer of City Week, its flagship event which takes place in London every year, in partnership with the City of London Corporation, TheCityUK, the Department of International Trade, etc. City Week is the leading forum for the international financial services community bringing together over 700 delegates from more than 50 countries around the world each year.

The CEO and founder of City & Financial Global Ltd, M. Maurice Button, was kind enough to respond to La Nouvelle Tribune and www.lnt.ma’s questions, on the sidelines of the 2019 edition of City Week, which was held in London’s Guildhall on May 20th and 21st. 

 

 

La Nouvelle Tribune:
The theme of the 2019 edition of City Week is « FINANCIAL SERVICES AS A DRIVER OF INCLUSIVE GLOBALIZATION ». Why did you choose such a theme?

M. Maurice Button:
The world has entered a phase of deglobalization, protectionism and widespread populism, largely in response to the financial crisis and its impact on the real economy.

This is evidenced by the election of President Trump, BREXIT and the surge in populist, nationalist poiliticians in Europe and elsewhere in the world, such as Brazil.

These political movements have drawn on the support of large parts of society that have begun to feel disenfranchised, ignored and marginalized by, as they perceive it, the political elite. They also feel that the economic benefits of globalization have passed them by and that there is a growing gulf between the rich and the poor.

The only way of countering this rising tide is to reinvent globalization and to make it more inclusive. Hence the theme of this year’s City Week.

How do you reconcile this approach, which puts London at the center of global financial services, with Brexit-related developments? Is the London market still as attractive, and will it still be in the coming months?

London is a global financial centre, not simply a European one. Its time-zone, its well-respected commercial legal system, the advantage of English being the business language of choice globally, the unparalleled nexis of financial skills and expertise to be found in London, the depth of its capital markets, its preeminent position in foreign exchange trading, the size of its asset management and hedge fund industries, the fact that it is home to Lloyd’s of London and is a top centre for international insurance, and the inventiveness and adaptability of the City of London and its financiers, as demonstrated over many centuries – all stand it in good stead for the future.

Furthermore, the centre of gravity of finance and economic growth is shifting inexorably towards the East, particularly China ands South East Asia. The majority of growth in GDP in the decades to come is expected to come from this region. London is well positioned to benefit from this shift and to help finance the growth in the region.

City Week 2019 – Great Hall – Crédits photo : FY/LNT

Globalization is essential to financial operations and has contributed greatly to their development. Will it still prevail as we witness it being strongly challenged, particularly in the United States, champions of unilateralism with Mr. Trump, or in several countries in continental Europe?

As mentioned above, we are currently experiencing a push back against globalisation, free trade and the institutions that have supported the world economic order since 1945. Populist politicians have stoked up discontent and promised simplistic solutions to those in society that have felt left behind, marginalized, alienated or simply cheated by income inequality in their countries.

However, there are valid reasons for this discontent and, if globalization, with its enormous capacity to generate wealth and be a force for good in society, is going to regain the ascendancy and win the argument against populist politicians, then it does need to change.
Its proponents need to listen to their critics and to respond. It needs to become much more inclusive and transparent.

The wealth it generates needs to be shared more fairly. In particular, trust needs to be restored in the honesty and integrity of financial institutions. Fair and transparent regulation shoud ensure that the primary purpose of financial institutions is to meet the financing needs of the real economy and consumers.

Numerous topics that will be debated during this edition relate to Europe and the integration and development of financial services. Do you believe that London’s place will remain the heart of financial operations to and from the Old Continent?

Continental Europe does not have well-developed capital markets, which is why European governments and companies have historically come to London to raise capital.

The European Commission is well aware of this and launched the European Capital Markets Union project a few years ago. ECMU was, in fact, the brainchild of Lord Hill, the UK’s then EU Commissioner for Financial Services.

The question is whether ECMU will have much traction and also how long it will take to take shape. The difficulty is that the reason why continental Europe does not have well-developed capital markets is as much to do with cultural preferences as it is deficiencies in market structure or the legal system.

As a result, continental Europe is much more dependent on bank lending, which in turn is constrained by the balance sheets of its banks. For those European governments and companies that want to raise large sums, London’s capital markets are likely to be their first choice for the forseeable future.

What lines of thought could be outlined about the global financial regulation?

There are many topics in global financial regulation that came up during the discussions at this year’s City Week, but one of the most important was operational resilience.

Operational resilience is at the top of most national financial regulators’ agendas, but, surprisingly, there isn’t an international regulatory framework for it in the same way that we have the Basel Accords for banking supervision, IOSCO for the securities and futures markets, the IAIS for insurance, the CPMI for payments and the IASB for accounting standards.

And yet the need is certainly as great, as it is operational resilience that will be the key determinant for how deep the next financial crisis will be, and how fast and how far it will spread.

It is also crucial at a more day to day, micro level in terms of the durability of individual firms and their ability to compete and survive.

Furthermore, it is one of the key safeguards that protects the interests of consumers, investors, employees and the wider stakeholder community.

How should we define operational resilience?
In short, it is the ability of firms, financial market infrastructure companies and the sector itself to prevent, respond to, recover from and learn from operational disruptions of all kinds.

The forms of operational disruption have become more complex and intense in recent years, as the pace of technological change has become more rapid and the cyber environment has become more hostile.

City Week 2019 – Exhibition Hall – Crédits photo : FY/LNT

Is green finance now a booming financial field? What are the paths of its upcoming development?

Green finance is set to be one of the dominant themes in finance over coming decades.

Without doubt, the Paris Agreement and the UN Sustainable Development goals have raised international awareness of the financial impact of climate change.

They have also increased collaboration efforts to transition to a low carbon economy, including the growth of green finance.

However, the sector remains comparatively tiny. Moody’s expects global sales of green bonds to be US$200 billion in 2019, after just 6% growth in 2018.

According to a recent discussion paper published by the FCA late last year, 38 green companies had raised US$10 billion in London at that point, including 14 renewable investment funds.

In the retail banking sector, green mortgages have been launched, as well as a number of asset/investment management products.

This is pretty small beer, and certainly won’t go far in terms of saving the planet. But this could be about to change. Regulators across the world have been driving a number of initiatives that could substantially increase the growth in green finance.

At the supranational level, the Financial Stability Board’s (FSB) Taskforce on Climate Related Financial Disclosures (TCFD) has launched an initiative aimed at helping companies quantify the risks associated with climate change, such as the physical effects of climate change on their operations and the impact of new green policies on their business models and their customers.

The TCFD is backed by companies responsible for some $100tn of assets. While it is currently a voluntary initiative, international regulators, such as the Bank of England and the FCA in the UK, are exploring whether it should be a mandatory requirement for financial services firms to report publicly on how they manage climate risks to their customers and operations.

And the FCA is also planning to consult on how all quoted companies, i.e. the large corporate customers of financial institutions, should report to the markets about their climate change risks.

This, in turn, would enable institutional shareholders to factor climate risk into their investment decisions with greater certainty. These enhanced reporting and disclosure requirements on financial institutions and their corporate customers may just be the incentives that are required to scale up green finance.

In order for the green finance market to flourish a further requirement is to agree on common, minimum standards and guiding principles for measuring the performance and impact of green finance products.
Minimum standards and a common taxonomy would enhance investor confidence and trust, thereby stimulating the market.

The EU Commission’s ‘Sustainable Finance Action Plan’, launched last year, seeks to do just this by introducing (a) a taxonomy for what should be considered as an ‘environmentally sustainable economic activity’, (b) new low carbon benchmarks to give investors guidance on their carbon footprints and (c) new disclosure obligations for institutional investors and asset managers.

Taking all the above regulatory initiatives into account, 2019 should see the start of real growth in green finance.

Interview conducted by Ms. Afifa Dassouli, London