Douglas Flint, HSBC's Group Chairman and the British Prime Minister’s Business Ambassador for UKTI, was in Luxembourg on Friday.
Talking on the topic of Striking a balance between the interests of regulators, creditors and shareholders in today's financial services environment, he stated that finance is an ecosystem; Luxembourg and the UK are very similar in many ways.
If we are having a financial system fit for purpose, the capital must be adequate to be remunerated. Looking at the role of regulators, regulation should support financial stability and should prevent the mis-alignment of resources, including asset classes. The supervisory regime should have the tools to ensure what the want to be done is done properly. The policy market must be shaped by governments - we have spent the last 7-8 years stating what we don't want the financial systems to do, and now is the time to know where we want to go; if we don't know that then we won't get there.
Since the crisis in 2007-8, we can now create the environment that is fit for purpose to ensure we can get out of the financial system what we want. We want stability as we want growth, we want the banking system to raise more money privately at the same time as offering dividends. We want fewer inter-dependencies. We don't want to see asset bubbles. We want greater disparity but complain about events that are not understood at a policy level. We wanted to get more money into infrastructure. We are upset by individual' ethical behaviour. We want to see new entrants but do not have a regulatory framework to support them. We don't have the knowledge yet how properly manage data and related privacy.
So we have challenges. He asked is there sufficient clarity in the system to create infrastructure and funding. There is a reduction in liquidity in the banking system, based on policy decisions. However, liquidity must be available from somewhere. He said we should be more mature in relation to the government's influence.
Finally, he asked how do we get the people we want in the industry to work in the right roles? One of the challenges to share with policy-makers is the sharing of risk.
Looking forward, infrastructure needs to support new urbanisation and energy needs will change too. Sustainability will also lead to an upgrade of infrastructure. But governments do not have the finance to serve these needs. We need to recognise that we are an eco-system that is connected to all of the world. Here in Luxembourg we need to work closely with all those at regulatory level, and internationally.
On a question from the audience regarding the potential of Britain exiting the EU and would this be then easier for Britain to impose its own regulation, he responded in the negative by explaining that regulation is now worked at at a global level. On another question, he agreed that there are too many regulations from the US, but added that the EU often cannot agree and "let in" America with its regulatory proposals.
Douglas Flint was talking at a luncheon on Friday organised by the British Chamber of Commerce in Luxembourg, at the Golf Club Grand Ducal in Luxembourg-Findel. He was introduced to the attendees by the BCC Chairman, Alison Macleod.
Photo by Geoff Thompson: Douglas Flint, HSBC's Group Chairman
