SUMMARY THE EUROFI FINANCIAL FORUM 2019 HELSINKI I 11, 12 & 13 SEPTEMBER ORGANISED IN ASSOCIATION WITH THE FINNISH EU COUNCIL PRESIDENCY All the publications of the Helsinki Financial Forum and of previous events are on the Eurofi website Summary Views Magazine Regulatory Update www.eurofi.net EDITORIAL The Eurofi Financial Forum 2019 took place in Helsinki during the Finnish Presidency of the EU Council. More than 1000 participants from the EU and international public authorities and the financial sector attended this three-day international event. Over 200 speakers contributed to the 40 sessions of this Forum, covering the main regulatory and supervisory developments in the financial sector at the European and global levels, the evolutions underway in the macroeconomic environment and also major on-going trends such as digitalisation and the development of sustainable finance. As the European elections were approaching, a common topic of many sessions was also the definition of the main priorities for the incoming Commission in the financial services sector. In the following pages you will find the summaries of all the sessions that took place during this international Forum and the transcripts of the speeches. We hope you enjoy reading this report which provides a detailed account of the views expressed by the public and private sector representatives who took part in this event on the latest regulatory developments in the financial sector and how to improve the functioning of the EU financial market. Marc TRUCHET Didier CAHEN Jean-Marie ANDRÈS Senior Fellow Secretary General Senior Fellow CONTENT 07 SUMMARIES OF THE SESSIONS 08 EU AND EUROZONE CHALLENGES AND PRIORITIES Key priorities for the incoming Commission Strengthening the international role of the Euro Improving capital allocation across the EU Adapting EU legislative processes 25 GLOBAL COOPERATION AND BREXIT IMPLICATIONS Global cooperation on financial services Latest Brexit developments and future of EU-UK relations Enhancing financial policies dealing with third-countries 34 PROSPECTS OF THE EU BANKING AND FINANCIAL SECTOR Improving the global competitiveness of the EU financial sector Impacts of Basel III on EU financial activities Making the Banking Union effective New trends in the Nordic – Baltic region 48 FINANCIAL STABILITY AND SAFETY AML / TF detection, supervision and EU coordination Sovereign / financial sector / Central Bank loop Cyber-security and cyber-resilience Medium-sized bank resolution CCPs: completing the post-crisis agenda Insurance comprehensive risk framework 66 SUSTAINABILITY AND LONG-TERM INVESTMENT ESG agenda: EU priorities Fostering investment in sustainable projects Policies for addressing climate change risks Tackling long-term investment disincentives Revising Solvency II: main policy priorities 81 DIGITALISATION AND FINTECH Implications of digitalisation for the EU financial sector Digitalisation and new technologies in the retail space Reaping the benefits of DLT and cloud EU electronic payment strategy Data challenges associated with AI 97 DEVELOPING EU CAPITAL MARKETS CMU way forward: IMF proposal for a new action plan Refocusing CMU: key policy priorities Developing equity financing for SMEs Increasing retail engagement in capital markets MiFID II state of play and remaining challenges Upcoming priorities for EU securities post-trading AIFMD review PEPP: what needs fixing? 125 SPEECHES Mika Lintilä - Minister of Finance, Finland Welcome address Olli Rehn - Governor, Bank of Finland Which economic and financial priorities for fostering growth and innovation in the EU? Agustin Guillermo Carstens - General Manager, Bank for International Settlements The quest for financial integration in Europe and globally Bruno Le Maire - Minister of Economy and Finance, France The future of the Capital Markets Union – Towards an Investment and Savings Union Dietrich Domanski - Secretary General, Financial Stability Board Three priorities for international regulatory and supervisory cooperation Hester M. Peirce - Commissioner U.S. Securities and Exchange Commission Braided bread and boiled beer Liange Liu - Chairman, Bank of China Limited Views from an Asian bank on the role of the financial sector in fostering innovation and economic growth Pål Erik Sjåtil - Managing Partner, Europe, McKinsey & Company Which economic and financial priorities for fostering growth and innovation in the EU? 145 EXCHANGES OF VIEWS Risk sharing in EMU N. Calviño (Min Fin Spain), P. Gramegna (Min Fin Luxembourg), V. Šapoka (Min Fin Lithuania), K. Regling (ESM) What toolbox is needed to deal with new emerging risks? D. Falaschetti (U.S. OFR), S. Woods (Bank of England), F. Mazzaferro (ESRB) Views of a global bank CEO B. Thompson (Bank of America), D. Wright (Eurofi) What ambitions for the EU banking sector and related policy priorities? A. Enria (SSM), X. Musca (Crédit Agricole), A. Rivera (Min Fin IT), C. San Basilio (Min Fin ES), F. Hufeld (BaFin) Enhancing the role of asset management in the financing of the EU economy P. Thomson (JP Morgan AM), D. Wright (Eurofi) Developing securities markets A. Friedman (Nasdaq), D. Wright (Eurofi) 167 INDEX OF SPEAKERS European public authorities Global and international public authorities Industry representatives Other stakeholders 177 POLL RESULTS New Commission, CMU 2.0 Euro, Retail investment, EU-UK Sustainability, Digitalisation, AML/TF 183 PORTFOLIO Helsinki 2019 SUMMARIES OF THE SESSIONS Detailed output of the sessions 8 EU AND EUROZONE CHALLENGES AND PRIORITIES 25 GLOBAL COOPERATION AND BREXIT IMPLICATIONS 34 PROSPECTS OF THE EU BANKING AND FINANCIAL SECTOR 48 FINANCIAL STABILITY AND SAFETY 66 SUSTAINABILITY AND LONG-TERM INVESTMENT 81 DIGITALISATION AND FINTECH 97 DEVELOPING EU CAPITAL MARKETS 7 SUMMARIES OF THE SESSIONS EU AND EUROZONE CHALLENGES AND PRIORITIES conflict with boosting economic growth. If not done well, it Key priorities for the can, but a reliable financial system gives confidence and is growth-boosting. Getting the balance right is a task for the incoming Commission next Commission and the Council, especially the Markets in Financial Instruments Directive (MiFID) and Solvency II reviews, Alternative Investment Fund Managers Directive 1. The EU financial system is more resilient but (AIFMD) and other issues that arise. Lessons are usually poorly integrated learned from past mistakes, in an ongoing process. 1.1 The EU financial system is more resilient Another official stated there is no prioritising An official stated that Europe’s financial system is between the three goals or priorities. Financial stability is more stable today than 10 or 15 years ago. The question is a prerequisite for growth is agreed. A public decisionmaker whether that is enough to face the challenges globally or also agreed that fostering integration, growth and financial closer to home. Another official noted that, between 2015 stability should be priorities and there is no reason to rank and 2019, the Banking Union and Capital Markets Union them. There are many uncertainties, with major risks (CMU) progressed towards a more resilient and consistent including trade, Brexit, geopolitical tension and others, so framework for European financial services, covering aspects caution is needed. The economy is slowing, so avoiding such as prudential ratios, central clearing or transparency. recession is key and being ready to act is important. There This deepened approach began after the financial crisis, are margins of manoeuvre and the European Central Bank and aimed to restore buffers, increase reporting and (ECB) has taken some steps. The work on the European tighten supervision. dimension of revamping and relaunching new investment 1.2. European financial markets remain underdeveloped plans is crucial and linked to financial-related issues and and poorly integrated and the Banking Union is far so financial policies require reflection. Financial regulation from effective requires acting to support growth and not impede it with An official advised that time was spent after the negative impact. financial crisis to enhance the financial framework, bank An industry representative advised that growth is capital and financial regulation. Institutions such as the Europe’s goal. Integration and stability are fundamental Single Supervisory Mechanism (SSM), Single Resolution ingredients to achieve long term and sustainable Fund (SRF) and Single Resolution Board (SRB) were growth. The priorities have already been stated. The two created but fragmentation in the banking area is worse main streams are completing the Banking Union and than before the global financial crisis and policies have not strengthening the CMU, as it is lagging behind. Stability been implemented to support growth. Market integration is further along than integration. Stability must not be in Europe also lags despite high household savings. This forgotten, but a concentrated effort is needed on banking is the reason why a group of German, Dutch and French sector fragmentation and the CMU components. An experts were asked to work on CMU to define priorities and integrated and concentrated banking sector is required, as bring sufficient political support and dynamic to focus on delivering regulation which reaches that outcome. is building up the CMU. That is tantamount to creating a 1.3. The global competitiveness of EU financial markets single market in services because the difficulties touch all is challenging the delicate points of a single market for services. A Banking