By Penza News
The 28th International Financial Congress (IFC) ‘Financial Markets: Increasing Complexity, Maintaining Stability’ is being held at the sites of the Boris Yeltsin Presidential Library and the Astoria Hotel in St. Petersburg on July 3–5.
The event is organized by the Central Bank of the Russian Federation with the support of the Roscongress Foundation. Representatives of the Central Bank of the Russian Federation, foreign regulators, international financial organizations, large banks and professional associations will take part in the work of the IFC.
The programme for IFC-2019 is divided into several thematic tracks: macroeconomics and monetary policy, banks, finance market professionals, microfinance, insurance, collective investments, main challenges and growth points.
As expected, Elvira Nabiullina, Governor of the Central Bank of Russia, will speak at the opening ceremony. The IFC-2019 will start with the plenary discussion ‘How Can the Central Bank Achieve its Goals in the Context of the Growing Diversity of Risks and an Increasingly Complex Market Structure?’ that will be devoted to the work of central banks in an era of high volatility in global markets. The meeting participants will discuss how regulators of emerging market countries should combine monetary and financial stability measures.
Moreover, the IFC participants will pay attention to such issues as digital transformation, cyber risks in the financial sector, new approaches to financing the construction of housing and infrastructure projects.
Speaking about the importance of countering cyber threats in financial sector, Anthony Glees, Director, Centre for Security and Intelligence Studies (BUCSIS), the University of Buckingham, reminded that the digital economy provides massive opportunities for fraud.
“Cyber-crime cost the world – that is 978 million users worldwide – 600 billion dollars in 2017. […] There is some evidence that overall crimes are falling as companies and individuals become more aware of the dangers. However, the vast majority of fraud offences are not reported to the police,” the analyst told PenzaNews, adding that half of all UK businesses have suffered from cyber-attacks or cyber-crimes.
According to the expert, it is extremely important to find joint solutions to the problem, since “businesses thrive from trustfulness.”
“Fraud destroys trust, making it hard to distinguish between genuine trading opportunities and fraud. The net effect is to err on the side of false positive, or, to put it another way, not trade even when trading would be fine,” Anthony Glees explained.
“If there is no faith in the markets of the future, which will largely be digital markets, and if there is no 5G to sustain them, people will increasingly regard the digital economy as a lawless space, won’t trade on it and recession will loom,” the expert said.
In his opinion, international discussions are an important condition for the formation of a secure cyberspace.
“Countries should, of course, work together. The UN should be involved and there should be an international cyber criminal court, established under the UN, perhaps at the Hague, to indict and prosecute fraudsters wherever they conceal themselves,” Anthony Glees said, stressing that a recession for the world “would in effect condemn the poorest everywhere to an appalling future.”
Commenting the current situation in global financial markets, Professor Dane Rowlands from the Norman Paterson School of International Affairs, Carleton University, Ottawa, said that he is reasonably optimistic.
“I think the global financial crisis in 2007–2008 has helped to keep financial markets reasonably tame recently due to the hesitation of firms to take on too much risk or be very innovative, and the regulatory responses in major markets. Financial regulators always focus on the last crisis, however, and find it harder to anticipate the next one which, unfortunately, always seems to materialize eventually,” Dane Rowlands said.
According to him, the main focus today is still on problems such as financial institutions that are ‘too big to fail’, the collapse of which have large and widespread effects in real and financial markets.
“A second and related problem is how to ensure adequate capital for financial institutions at risk, including how to make shareholders pay for bank failure more directly (which will hopefully give them an incentive to monitor their banks more closely). Finally there remains a problem of separating basic retail banking services for average clients from the more risky financial trading activities of large institutions,” the analyst said.
“Financial markets by their very nature seek to innovate to gain an advantage, and they will eventually develop new instruments […] I do not expect this process to be that profound or fast after the last crisis, but there are signs that some governments, for example in the US, where there are mixed signals from government that may encourage new innovation in response to deregulation or changes in regulation. However it is never easy to spot difficulties in financial markets,” Dane Rowlands added.
Answering a question about the significance of international discussions in the financial sphere, the expert stressed that the main international discussions take place in the Basle Committee on Banking Standards at the Bank for international Settlements and the Financial Stability Board.
“Russia is a member of both. Other meetings are of much less global consequence. From what I can see of the St. Petersburg meetings, very few if any of the regulators from the major financial centres are represented, and many of the participants are from the private sector or from governments in the region. I do not expect private sector representatives to be that interested in designing new effective regulations. While discussions usually cannot hurt and may do some good in terms of sharing information and perspectives, my focus would be on the Basle Committee and Financial Stability Board activities for understanding the evolution of global regulatory standards,” the analyst explained.
At the same time, Professor Nobuhide Hatasa, Faculty of Economics, Nagoya University of Economics, called the IFC “an international meeting open to any individual and institution who are interested in financial and monetary issues.”
“While Bank for International Settlements and Financial Stability Board are public entities organized by concerned states and therefore their arguments are more or less controlled by their stakeholders, the IFC is just an open discussion forum where a variety of people including academic professionals, private bankers, governmental banking officers, and specialists from international financial institutions express their own views and talk on current problems and future challenges,” Nobuhide Hatasa said.
“As long as free and open speech and discussion are guaranteed at IFC, it will continue to be an important and meaningful platform that offers the world an useful and insightful message on global finance and suggests public organizations a basis for discussions on urgent or upcoming financial issues,” the expert added.
In turn, Yakov Mirkin, Head of the department of international capital markets at the Institute of world economy and international relations of the Russian academy of sciences (IMEMO), Scientific Director of the Institute of financial and economic research of the Financial university under the government of the Russian Federation, Chairman of the committee on financial markets and credit organizations of the Chamber of commerce and industry of Russia, pointed out a number of problems in the Russian financial sector, which, in his opinion, require finding solutions.
“[This is] a small financial system, unable to finance economic growth and modernization; inefficient monetary, credit and interest rate policies that keep financial markets frozen, namely: low availability of credit for enterprises, ultra-high interest rates, low operating capacity and capitalization of the capital market; accumulated systemic risks, in particular, the future devaluation of the ruble exchange rate, local financial bubbles – loans to the population; credit, interest rate and currency risks; monetary desertification of the regions; erosion of banking infrastructure – the number of banks has decreased by almost 50% since 2013; over-concentration of monetary resources in Moscow; nationalization of the banking system, ” Yakov Mirkin said.
At the same time, speaking about the format of the upcoming IFC, the expert expressed doubt that the above-mentioned problems will be discussed in this interpretation.
Philip Hanson, Associate Fellow, Russia and Eurasia Programme, Chatham House said that the choice of currency in trade settlement is the main topic on which international financial discussions in a wide range of fora are important.
“The US pressure on other countries to implement US sanctions, for example, on Iran and Russia, has led both the EU and Russia to negotiate some form of de-dollarization: in some cases, substituting the euro for the dollar in invoicing and settlement, in other cases seeking bilateral settlement arrangements involving the yuan and the rouble, for example. This has not proved to be easy, but efforts continue,” Philip Hanson said.
At the same time, Andrew Karolyi, Deputy Dean and College Dean for Academic Affairs, Professor of Finance and Harold Bierman Jr. Dinguished Professor of Management, Cornell S.C. Johnson College of Business, Cornell University, drew attention to the slowdown in global economic growth.
“Central banks around the world are working hard to accommodate the downshift. There are many forces at work in hastening the slowdown. Among the most acutely important forces currently at work are geopolitical as well as economic policy (for example, trade-related) uncertainties and these appear to be the most challenging for monetary policy adjustments to accommodate,” Andrew Karolyi said.
He also emphasized the need for international discussions to avoid serious problems in the financial sphere.
“With international monetary cooperation through the Bank for International Settlement and other multilateral organizations, it seems we are better equipped to manage potential global financial instability than ever before. However, the geopolitical and economic policy uncertainties are more numerous and intense than we have seen in many years. Like many, I hope that the many programs, conferences, and multilateral discussions continue unimpeded by short-term political interests to ensure our best chance to sustain global financial stability,” the expert concluded.