Ein Leitfaden für Finanzkrisenmanager

May 28, 2019 Howard Davies, Project Syndicate

Howard Davies, the first chairman of the United Kingdom’s Financial Services Authority (1997-2003), is Chairman of the Royal Bank of Scotland. He was Director of the London School of Economics (2003-11) and served as Deputy Governor of the Bank of England and Director-General of the Confederation of British Industry.

EDINBURGH – Journalisten, so heißt es, verfassen „eine erste grobe Version der Geschichte”. Es ist ein großer Anspruch, aber die Besten unter ihnen kommen dem nahe. Während der Großen Finanzkrise 2008 gelang es Andrew Ross Sorkin von der New York Times mit seinem Buch Die Unfehlbaren. Es ist noch immer eine zutreffende Beschreibung dessen, was an der Wall Street los war, als die Märkte zusammenbrachen. Sorkin hatte einen guten Zugang zu den beteiligten Schlüsselpersonen. 

Die zweite Version der Geschichte wird oft von den wichtigsten Beteiligten selbst geschrieben. Nach dem Zweiten Weltkrieg war Winston Churchill zuversichtlich, die Geschichte würde ihn freundlich behandeln, weil er beabsichtigte, „diese Geschichte selbst zu schreiben”. Als die Finanzkrise ausbrach, könnte derselbe Gedanke auch Hank Paulson, Ben Bernanke und Tim Geithner angetrieben haben, die US-Finanzminister, Vorsitzender der Federal Reserve Bank und Präsident der New York Fed waren.

The past decade has brought a compliance boom in banking

Date: 30-04-2019
Source: The Economist

Staff trying to keep banks on the right side of regulators are in high demand

COMPLIANCE OFFICERS are the killjoys of finance. To bankers and traders keen to let rip, they are the po-faced types who, while generating no revenue themselves, frown at any transaction that might breach this rule or contravene that regulation. A recent episode of “Billions”, a television drama about Wall Street, captured the rainmakers’ frustration: so fed up is “Dollar” Bill Stern with having his wings clipped by Ari Spyros that the veteran trader rams the side of the compliance chief’s Porsche (pictured above) when he pulls out of the car park of their hedge fund, Axe Capital.

But pity not finance’s in-house policemen, for they have had a golden decade since the crisis. While swathes of banking has laboured under cutbacks and stiff capital requirements, compliance departments’ headcount and clout have grown. Banks clobbered by fines for aiding corruption, money-laundering and sanctions-busting have beefed up their compliance, risk, legal and internal-audit teams. Compliance officers will never be the rock stars of finance, but they have moved from drums to rhythm guitar. And though some banks hint at having reached “Peak Compliance”, staffing and investment are likely to remain well above pre-crisis levels.

The Transatlantic Regulation Rift

Apr 4, 2019 Howard Davies, Project Syndicate

Howard Davies, the first chairman of the United Kingdom’s Financial Services Authority (1997-2003), is Chairman of the Royal Bank of Scotland. He was Director of the London School of Economics (2003-11) and served as Deputy Governor of the Bank of England and Director-General of the Confederation of British Industry.

European governments have seemingly concluded that hosting large, risky, and volatile financial firms and markets is not worth it, while the US administration still regards the financial sector as a comparative advantage for New York. Which side has made the wiser choice?

LONDON – US President Donald Trump made his intentions on financial regulation clear from the very start of his administration. He issued an executive order requiring that, for every new regulation imposed, at least two should be targeted for repeal. No such deregulatory zeal is evident in Europe.

The Economic Growth, Regulatory Relief, and Consumer Protection Act, signed by Trump in May 2018, has, in practice, emphasized the second part of its title over the third. According to a set of regulatory principles issued by the administration, regulators must consider the competitiveness of US firms and advance American interests in international financial forums. The Treasury was instructed to produce four reports, covering banks, capital markets, asset management and insurance, and non-banks and fintech, to show how the principles could be realized through a variety of deregulatory initiatives. All four reports have now been issued.

How to Govern a Digitally Networked World

Mar 25, 2019 Anne-Marie Slaughter , Fadi Chehadé, Project Syndicate

Anne-Marie Slaughter, a former director of policy planning in the US State Department (2009-2011), is President and CEO of the think tank New America, Professor Emerita of Politics and International Affairs at Princeton University, and the author of Unfinished Business: Women Men Work Family.

Fadi Chehadé, a former president and CEO of ICANN (2012-2016), is a member of the UN Secretary-General’s High-Level Panel on Digital Cooperation and an advisory board member of the World Economic Forum’s Center for the Fourth Industrial Revolution.

Because the Internet is a network of networks, its governing structures should be, too. The world needs a digital co-governance order that engages public, civic, and private leaders on the basis of three principles of participation.

WASHINGTON, DC – Governments built the current systems and institutions of international cooperation to address nineteenth- and twentieth-century problems. But in today’s complex and fast-paced digital world, these structures cannot operate at “Internet speed.”

Recognizing this, United Nations Secretary-General António Guterres last year assembled a high-level panel – co-chaired by Melinda Gates and Alibaba co-founder Jack Ma – to propose ways to strengthen digital governance and cooperation. (Fadi Chehadé, a co-author of this article, is also a member.) It is hoped that the panel’s final report, expected in June, will represent a significant step forward in managing the potential and risks of digital technologies.

Why big tech should fear Europe

Date: 21-03-2019
Source: The Economist

To understand the future of Silicon Valley, cross the Atlantic

“The birthday of a new world is at hand.” Ever since Thomas Paine penned those words in 1776, America has seen itself as the land of the new—and Europe as a continent stuck in the past. Nowhere is that truer than in the tech industry. America is home to 15 of the world’s 20 most valuable tech firms; Europe has one. Silicon Valley is where the brainiest ideas meet the smartest money. America is also where the debate rages loudly over how to tame the tech giants, so that they act in the public interest. Tech tycoons face roastings by Congress for their firms’ privacy lapses. Elizabeth Warren, a senator who is running for president in 2020, wants Facebook to be broken up.

Yet if you want to understand where the world’s most powerful industry is heading, look not to Washington and California, but to Brussels and Berlin. In an inversion of the rule of thumb, while America dithers the European Union is acting. This week Google was fined $1.7bn for strangling competition in the advertising market. Europe could soon pass new digital copyright laws. Spotify has complained to the eu about Apple’s alleged antitrust abuses. And, as our briefing explains, the eu is pioneering a distinct tech doctrine that aims to give individuals control over their own information and the profits from it, and to prise open tech firms to competition. If the doctrine works, it could benefit millions of users, boost the economy and constrain tech giants that have gathered immense power without a commensurate sense of responsibility.

Can Economics Shake Its Shibboleths?

Date: 15-03-2019
Source: by Jim O’Neill

Jim O’Neill, a former chairman of Goldman Sachs Asset Management and a former UK Treasury Minister, is Chairman of Chatham House.

Since the 2008 financial crisis, economic orthodoxies have been collapsing left and right. Under conditions of low unemployment, elusive inflation, weak productivity growth, and high profitability, economists in advanced economies may need to go back to the drawing board.

LONDON – Though economics aspires to the rigor of the natural sciences, at the end of the day it is still a social science. At no point in the past 40 years has this been more evident than it is now.

For decades, conventional macroeconomic analysis has rested on the edifice of the Phillips curve, which asserts a clear tradeoff between unemployment and inflation: when the unemployment rate falls below a certain point, inflation must rise. But this assumption has not been borne out in the decade since the 2008 financial crisis. In both the United Kingdom and the United States, for example, the unemployment rate is historically low, yet inflation remains weak.

Or consider monetary policy. Even after years of quantitative easing (QE) and ultra-low interest rates, central bankers in the advanced economies – particularly the eurozone – have continued to undershoot their inflation targets. Economists have also had to question long-held assumptions about downward nominal wage rigidity, an artifact of the 1960-70s, when organized labor was much stronger. Clearly, the idea that employees will always resist cutting wages (or workers’ hours) no longer applies.

Elizabeth Warren Calls for Breakup of Amazon, Google, Facebook

Date: 09-03-2019
Source: The Wall Street Journal

Democratic presidential hopeful puts spotlight on antitrust in tech industry ahead of 2020 campaign

Sen. Elizabeth Warren called for ‘big, structural changes to the tech sector to promote more competition.’

Sen. Elizabeth Warren, the Massachusetts Democrat running for president, on Friday called for the breakup of Amazon.com Inc., Alphabet Inc.’s Google and Facebook Inc., taking an aggressive populist stance against some of the nation’s most powerful companies.

“Today’s big tech companies have too much power—too much power over our economy, our society and our democracy,” Ms. Warren said in an online post. “They’ve bulldozed competition, used our private information for profit and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.”

“My administration will make big, structural changes to the tech sector to promote more competition—including breaking up Amazon, Facebook, and Google,” Ms. Warren said.

The companies didn’t respond to requests for comments on the senator’s proposal.

Limits on Wall Street Pay Are Back on Regulators’ Agenda

Date: 06-03-2019
Source: The Wall Street Journal

Some bank executives are open to new rules, hoping for softer pay limits now than if a Democrat becomes president in 2020

The Fed and five other regulators would be involved in any new regulation on banker pay.

WASHINGTON—Long-dormant efforts to restrict Wall Street pay are back on the agenda as regulators turn to unfinished business left over from the 2010 financial overhaul.

Banking regulators are discussing reviving a proposal that would require big banks to defer some compensation for executives and to take back more of their bonuses if losses pile up at a firm, according to people familiar with the matter.

The talks are in early stages and involve top officials from at least three bank regulators: the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Federal Reserve, the people said. Some bank executives are open to having the agencies write a new version of the rules, betting the limits would be milder during the Trump administration than if a Democrat takes the White House in 2020.

Is Ethical A.I. Even Possible?

Date: 02-03-2019
Source: The New York Times By Cade Metz

Building ethical artificial intelligence is an enormously complex task. It gets even harder when stakeholders realize that ethics are in the eye of the beholder.

Building ethical artificial intelligence is an enormously complex task. It gets even harder when stakeholders realize that ethics are in the eye of the beholder.

HALF MOON BAY, Calif. — When a news article revealed that Clarifai was working with the Pentagon and some employees questioned the ethics of building artificial intelligence that analyzed video captured by drones, the company said the project would save the lives of civilians and soldiers.

“Clarifai’s mission is to accelerate the progress of humanity with continually improving A.I.,” read a blog post from Matt Zeiler, the company’s founder and chief executive, and a prominent A.I. researcher. Later, in a news media interview, Mr. Zeiler announced a new management position that would ensure all company projects were ethically sound.

The Big Tech/FinTech Disruption

Feb 20, 2019 Howard Davies, Project Syndicate

Howard Davies, the first chairman of the United Kingdom’s Financial Services Authority (1997-2003), is Chairman of the Royal Bank of Scotland. He was Director of the London School of Economics (2003-11) and served as Deputy Governor of the Bank of England and Director-General of the Confederation of British Industry.

A new report by the Financial Stability Board argues that the Big Tech could “affect the degree of concentration and contestability in financial services, with both potential benefits and risks for financial stability.” Managing the risks will require much more than vigilance by banking supervisors.

LONDON – As its Valentine’s Day present to the world, the Financial Stability Board (FSB) in Basel published a report on financial technology, or fintech, and market structure in financial services. The subtitle was more insightful, and revealed the authors’ intentions: “market developments and potential financial stability implications.”