THE PERTINENCE OF TRUST IN OUR GLOBAL ENVIRONMENT
Building trust and confidence will always remain as a core constant of the Securities Commission’s efforts
IWOULD like to begin by sharing the wisdom of a common proverb, “Trust takes years to build, seconds to break and forever to repair”. While the complexities of trust have been the subject of great discourse, an appreciation of its delicate nature and profound effect is — in my view — a necessary expression of wisdom and foresight. We may choose to trust under confidence that our best interests would be advocated and our exposures protected. Yet, within the brisk instance of a breach, the entire stability of its state could be undone, prompting a continued attitude of scepticism, suspicion and doubt.
Despite this fragility, trust grows in importance as a consequence of its ability to inspire confidence. Confidence galvanises the selection of certain choices — and choices made manifest in discrete and tangible actions. These actions influence the ways in which individuals interact within their relative social and economic environments — not only affecting the willingness for cooperation and collaboration but also impacting the daily realities of consumer choices and behaviours.
It is in reflection of such that collective levels of trust amongst various societal actors have been widely regarded by economists, political scientists and researchers to possess widespread capabilities in determining broad trends. These include fundamental associations to market forces, economic performance and societal wellbeing.
Today, the far-reaching influence of trust has stemmed into urgent discourses surrounding the state of global affairs. In June, I had the privilege of co-chairing the high-level Salzburg Global Finance Forum of high-level policymakers. In my speech at the opening of the forum, I highlighted several pertinent global trends that threaten the harmony of our prevailing socioeconomic order. These include the widening fissures of income inequality, increasing risks of climate change, surging debt levels amongst major economies and anxieties surrounding job security.
These are but a few features of our global landscape that has cultivated strong challenges against status quo, promulgating feelings of unease, and in some cases, leading aggressive motions for change. In developed economies, nationalist movements expressing anti-globalisation sentiments have demanded policy readjustments towards protectionism — steps perceived in their minds as cures for various structural inequities. It is important to note that these occurrences are symptomatic of a global environment lacking trust.
As stakeholders convene with intent to embark upon the challenging journey of restoring trust, we must remain cognisant that we dwell in a unique era that brings about distinct opportunities and uncertainties. Unprecedented technological evolution, rapid informational dissemination, intensifying competition and growing consumer demands have all catalysed the substantial degree to which the world is inextricably linked — connecting nations, markets, businesses and people in a vast and complex tapestry.
Trust as a Backbone of Our Financial Markets
This depth of inter-connectivity is particularly evident in the financial markets, where risk transmission and tolerance is realised across a broad spectrum of market segments. The recognition of these transmissions of risk is a simple yet profound understanding that the actions of a few could impact the conditions of many.
Several experiences within markets have showcased and reminded us of this — demonstrating instances of market failures that diminished trust and propagated market manipulative behaviours beyond the confines of national borders and economic boundaries. The LIBOR 2 (London Interbank offered rate) scandal represents one such example where dealers were discovered colluding to manipulate interbank reference rates. This led to a loss of trust in a key benchmark, resulting in massive fines for financial institutions and moves towards developing a more robust, transaction-based reference rate.
Where market failures are concerned, there is perhaps none more historically recent and stark than the global financial crisis — an event which observed the collapse of large financial institutions and resulted in severe disruption in developed markets, an impact which echoed throughout all four corners of the globe.
As a consequence, systemic risk recognition begun to surface in mainstream conversations surrounding stability, expressing concerns that financial institutions and corporations had manifested into “too large” entities whose downfall would cascade in widespread adversity. Businesses crashed, communities lost the capacity to form stable livelihoods and families witnessed the dissipation of their wealth. Ordinary citizens sustained the brunt of the ensuing recession only deepened by the prevalence of diminishing liquidity and a credit crunch. As a result, many stakeholders de-