Under the motto Reality Check – How to Foster Growth in the New Regulatory Environment, central bank governors, regulators, representatives of supervisory authorities, financial policy makers, academics and practitioners will meet for the fifth time in the Financial Centre Frankfurt to discuss questions of financial market regulation and their impact at the Frankfurt Finance Summit.
After years in which discussions focused on political and regulatory overhaul after the financial crisis, attention has shifted to the challenges of how to get Europe back on track in terms of growth. Thus, it is appropriate that the theme of the 5th Frankfurt Finance Summit How to Foster Growth.
One priority of the Summit is determining what contribution the finance industry can contribute to this growth. The long-term loans make up more than two-thirds of total loans in Germany. This is difficult to forget in this context. Dr. Lutz Raettig, Chairman of the Executive Board of Frankfurt Main Finance, explains, “Long-term financing has become increasingly difficult in the current regulatory environment. That narrows the scope of the finance sector’s ability to adequately fulfil their role in financing of growth.”
Wolfgang Hartmann, CEO of the Frankfurt Institute for Risk Management and Regulation (FIRM), adds, “At present, regulation complicates the offer conditions of long-term loans, which are crucial financial instruments for private investment growth throughout Europe. Required capital charges for asset positions and the cost of refinancing have all increased. Other buzzwords are net stable funding ratio, leverage ratio and the increased need for provisions under IFRS 9. ”
Dr. Andreas Dombret, Member of the Board of the Deutsche Bundesbank, says, “To serve the real economy and facilitate growth, banks must be both stable and profitable. While profitability is in the hands of the banks themselves, regulators can improve stability by establishing a reasonable regulatory framework.”
Hessian Economics Minister Tarek Al-Wazir sees no contradiction between regulation and growth. “To achieve sustainable development both must be reconciled. Therefore, politicians must continue to develop financial regulations that are both simpler and stricter. To achieve this, they need to always take into account the impacts on the real economy, for example by implementing longer transition periods. Only banks with a solid capital base can ensure long-term sustainable growth – smart regulatory policy must be based on this principle.”
Jonathan Hill, European Commissioner for Financial Stability, Financial Services and Capital Markets Union, points out that in some EU countries, where banks are barely lending, small and medium enterprises are especially struggling. Therefore, we must clear the way for alternative financing methods. In this regard, the Capital Markets Union is the flagship project of the Commission to build from scratch a single market for capital. This will help to free up financial resources, which are indeed plentiful, and allow them to serve European businesses. Hill further explained, “The Capital Markets Union should complement the role of banks, not replace it. The aim is to provide European solutions, not imitate American. Europe’s banks will of course continue to play a crucial role. I am sure that many companies continue to get the bulk of their financing through bank loans. But there are others who would welcome other financing options.”
In its fifth year, the Frankfurt Finance Summit has established itself as a forum, which is characterized by the exclusivity and expertise of its participants. The conference can be followed live via stream on the Internet.