FINANCING THE REAL ECONOMY:
REGULATION vs REALITY

November 2012

E.F de LENCQUESAING
INTRODUCTION

Page 2
1. EUROPE: AN HISTORICAL AMBITION
PAST

THE ROMANS

IXe

CHARLEMAGNE

XIXe

NAPOLEON CODE NAPOLEON
- CREATION OF ITALIA GA...
1. TOWARDS A NEW ROLE FOR CAPITAL MARKET?

Page 4
1.1.

LIMITS OF A CAPITAL DRIVEN
PRUDENTIAL RULES APPROACH?

Page 5
1.2. THE 3 PILARS OF THE FINANCIAL
ECOSYSTEM

Page 6
1.3

A CREDIT DRIVEN MODEL WITH MORE
CAPITAL MARKETS SERVICES

Page 7
1.4

A STRATEGICAL CHALLENGE FOR
EUROPE

Page 8
2. CONDITIONS FOR GROWTH

Page 9
2.1

STRATEGICAL CONDITIONS

– CONSOLIDATION OF CREDIT FACILITIES :
OPTIMIZING TRANSFORMATION CONDITIONS
 REINFORCEMENT O...
2.2
–

STRUCTURAL CONDITIONS

MARKET STRUCTURE  MIFID
• IS FRAGMENTATION AN ISSUE ? FOR France, YES
• REINFORCEMENT OF ST...
THE RISK CHALLENGE

2/3

• COMPLEXITY IS A GIVEN IN MODERN SOCIETIES : IT WILL INCREASE THROUGH
TECHNOLOGY AND GLOBALISATI...
THE RISK MACRO HEDGING CURVE

3/3

NEXT CRISIS
SOCIETAL
COMPLEXITY
RISK

THE RISK HEDGING TUNNEL
•
•
•
•

MACRO PRUDENTIAL...
III/ RÈGLES DU JEU / RÉGULATION / ECOSYSTÈME
4/ UN PROCESSUS MONDIAL : LECON DE LA CRISE-> G20
G 20

DES PRINCIPES

FSB
BA...
2.3

TOWARDS A LONG TERM INVESTMENT STRATEGY

– TO REBALANCE SHORT vs LONG TERM HORIZONS
– A L T INVESTMENT STRATEGY RAPS ...
CONCLUSION

Page 16
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"FINANCING THE REAL ECONOMY: REGULATION vs REALITY" Edouard-François de Lencquesaing at NES/CEFIR Public Seminar, 28 october 2013

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Financing the real economy de lencquesaing

  1. 1. FINANCING THE REAL ECONOMY: REGULATION vs REALITY November 2012 E.F de LENCQUESAING
  2. 2. INTRODUCTION Page 2
  3. 3. 1. EUROPE: AN HISTORICAL AMBITION PAST THE ROMANS IXe CHARLEMAGNE XIXe NAPOLEON CODE NAPOLEON - CREATION OF ITALIA GARIBALDI - CREATION OF GERMANY BISMARCK XXe EUROPEAN PROJECT FUTURE WORLD WAR I WORLD WAR II ROME TREATY - 1957 1958 THE EURO – 1999- 2002 TOWARDS A MULTIPOLAR WORLD A SHARED GLOBAL GOVERNANCEG20 CONSOLIDATION: AN EXISTENTIAL NECESSITY TO DRIVE EU GROWTH & DESTINY November 2012 E.F de LENCQUESAING TO INVENT AN INTEGRATED POLITICAL MODEL THROUGH A DEMOCRATIC PEACEFUL PROCESS
  4. 4. 1. TOWARDS A NEW ROLE FOR CAPITAL MARKET? Page 4
  5. 5. 1.1. LIMITS OF A CAPITAL DRIVEN PRUDENTIAL RULES APPROACH? Page 5
  6. 6. 1.2. THE 3 PILARS OF THE FINANCIAL ECOSYSTEM Page 6
  7. 7. 1.3 A CREDIT DRIVEN MODEL WITH MORE CAPITAL MARKETS SERVICES Page 7
  8. 8. 1.4 A STRATEGICAL CHALLENGE FOR EUROPE Page 8
  9. 9. 2. CONDITIONS FOR GROWTH Page 9
  10. 10. 2.1 STRATEGICAL CONDITIONS – CONSOLIDATION OF CREDIT FACILITIES : OPTIMIZING TRANSFORMATION CONDITIONS  REINFORCEMENT OF DEPOSITS (LT) + SECURITISATION : “80 CREDIT / 60 BALANCE SHEET” ? – CONSOLIDATION OF MARKETS: “ 60 CREDIT + 20 MARKET” ? WILL MARKET ROLE DOUBLE? – CONSOLIDATION OF MARKET FINANCE INNOVATIVE & ROBUST  not a quantitative issue, SELECTIVE & DIVERSIFIED PRODUCT TO GIVE FLEXIBILITY TRANSITING TO THE NEW UNKNOWN FINANCING MODEL Page 10
  11. 11. 2.2 – STRUCTURAL CONDITIONS MARKET STRUCTURE  MIFID • 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 • CASSIOPEA IS AN INTERESTING EXAMPLE - 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 Page 11
  12. 12. THE RISK CHALLENGE 2/3 • 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 March 30, 2012 12
  13. 13. THE RISK MACRO HEDGING CURVE 3/3 NEXT CRISIS SOCIETAL COMPLEXITY RISK THE RISK HEDGING TUNNEL • • • • MACRO PRUDENTIAL SURVEILLANCE BANKING STRUCTURES + RESOLUTION PLAN MARKET STRUCTURES  REGULATED OTC BASED ON LEVEL OF LIQUIDITY ACCOUNTING RULES HOW TO FOLLOW THE CURVE ? HOW TO MAKE THE NEXT CRISIS LESS PAINFUL OR SYSTEMIC March 30, 2012 13
  14. 14. III/ RÈGLES DU JEU / RÉGULATION / ECOSYSTÈME 4/ UN PROCESSUS MONDIAL : LECON DE LA CRISE-> G20 G 20 DES PRINCIPES FSB BANQUE MONDIALE FMI UNE TOUR DE CONTRÔLE IOSCO DES OUTILS DÉCLINAISON RÉGIONALE : CE DIRECTIVES EUROPÉENNES ESB BCE EBA ESMA EIOPA DÉCLINAISON NATIONALE : TRESOR UNE CHAINE DU RISQUE « EXISTENTIELLE » ? ACP BDF LOIS/DÉCRETS AMF CONSEIL D’ADMINISTRATION COMITÉ DES RISQUES DIRECTION DES RISQUES DÉCLINAISON ENTREPRISE : CULTURE DES RISQUES DIRECTION OPÉRATIONNELLE 14
  15. 15. 2.3 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….  THE ANNOUNCED EU COMM. GREEN BOOK Page 15
  16. 16. CONCLUSION Page 16
  17. 17. Contact:

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