Financial reforms will help to ensure market stability: Experts
Faced with various risks to financial stability and market volatility, top financial and banking pundits from around the world stressed on Monday the priority now is to pursue financial reforms that could improve financial flexibility and exercise moderate supervision.
At a panel discussion entitled “Managing Global Financial Risks and Opportunities in 2019” on the first day of the 12th Asian Financial Forum in Hong Kong, they reckoned that different economies confronted by different risks need different solutions in response.
For the European Union, today’s uncertainty is much more about market disintegration as free trade has come under tremendous pressure created by international trade conflicts and Brexit, said Burkhard Balz, executive board member of Deutsche Bundesbank — Germany’s central bank.
He noted that some solutions, aimed at ensuring the safety of the banking system and boosting financial stability in Europe, have already begun to take effect, such as the Single Supervisory Mechanism and the Single Resolution Mechanism — two pillars of the EU banking union.
British lawmakers are due to vote on Prime Minister Theresa May’s deal to leave the EU on Tuesday. It’s predicted the vote is unlikely to get enough support again, and the UK may have a “hard Brexit”, which would hurt the European economy.
Denis Beau — first deputy governor of Banque de France — said they will watch Brexit developments closely. He expected good results to emerge, but told financial institutions to be prepared for the worst.
However, although economic growth is slowing down, it’s still far from a downturn as the Eurozone economy is mature enough to fight potential crisis, said Beau. Considering the EU’s financial integration and the development of the European banking union, there’s no need to be unduly concerned.
Saeb Eigner — chairman of the Dubai Financial Services Authority — said while emerging markets had gone through a hard year in 2018, a strong and sustainable economic system is in demand.
He noted that the rising leverage is a key issue concerning emerging markets as some developing countries’ national debts have reached 180 percent of their gross domestic product. He expected debts to climb in 2019 and 2020 for emerging markets.
“What happens in China has great importance to emerging markets. It is managing to slow down the economic growth on the way — that’s to be welcomed. It indicates the Chinese government is addressing the highly leveraged economy and economic imbalance,” Eigner said.
Despite mounting debt, Russia currently has an expanding bond market and Sergey Shvetsov — first deputy governor of the Bank of Russia — believed it could offset certain external impacts effectively.
As for the bond market, many economies said they would issue green bonds as green finance is a hot topic worldwide, as well as an opportunity for the future.
According to Beau, France saw $14,500 billion in green finance last year and plans to issue green bonds in the first quarter of 2019.
With the growing market, Eigner reckoned that a clear framework should be built, such as what kind of products could be included as green bonds, as it now lacks a general standard and entry criteria.
The future of green finance depends on the movement of stakeholders, he added.