Have we de facto privatised profits and socialised losses in the financial sector
We continue to experience sweeping reforms to comply in almost all sectors and trades. The high profile frauds and failures of oversight have impacted the end-investors and put into question existing systems and methods of control. In spite of the rules and regulations aiming to alleviate the worst impacts of the Compliance crisis, Copenhagen Compliance continues its efforts to establish an international framework to prevent and mitigate future problems.
The Volcker Rule that required a firewall between loan-making, customer-serving banks and high-risk hedge funds and segregation of responsibilities between commercial banking and investment banking, is probably dismantled.
At the Copenhagen Compliance Conference we will discuss that firewalls are essential in any business. In a stable banking system, when hedge funds regularly blow up, and create a disorder in the loan-making system that is so vital to our families and businesses.
MF Global, is one of the recent examples, however their bad bets didn't damage our banking system, because MF Global wasn't part of a bank.
On the other hand legitimate risk hedging and market-making are big business, often making big profits. The Volcker firewall may hurt retired teachers and cops by decreasing "liquidity" in markets, which is how easy or hard it is to buy or sell securities.
Limitations to the financial industry may perhaps increase the amount that investors will have to pay for transactions, thereby decreasing the profits for pension funds of retired teachers and cops.
Being able to trade ever faster is not always an economic gain, either for investors or for the economy. High speed trading and computerized trading don't add much to the economy, and they can do massive damage when things go awry.
The Volcker firewall may even raise gas prices. Morgan Stanley, argue in a report that if a bank cannot make massive bets on the price of oil, then the price of gasoline will go up and 180,000 jobs will be lost.
On the other hand chairman of Exxon-Mobil estimated that the true price of a barrel of oil based on supply and demand should be in the $60-70 range at the same time prices were over $100.
As part of the ½ day on Compliance issues we will conduct a Round Table discussion. Some of the questions already received on the consequences of financial market reaction are:
- The prevalent political will to make financial markets and institutions pay more for the costs of explicit or implicit guarantees provided by national governments
- There is a desire to force changes to the business models of financial institutions
- There is an increased emphasis on ensuring taxes are collected on revenues from profitable investments
- The micro-economic behavior of financial markets is under scrutiny, including trading strategies such as naked short-selling
Frank Hailstones, Stig Nielsen, Danish FSA, Prof. Caspar Rose, Simon Collins, Mark Cunningham, Paul Grainger.
Lady Olga Maitland, Co-chair: Mariano Davies
Register for the ½ day on Compliance issues and get your questions answered by the experts in the panel