Capital market integration - where is the limit?

Transcription

1 Andres Sutt Capital market integration - where is the limit? 22 May 2008 Tallinn

2 Outline of the presentation Implications of globalisation and integration Financial stability perspective A way forward Andres Sutt Capital market integration where is the limit? 2

3 Implications of globalisation and integration

4 Era of globalisation and integration Significant changes during the past decade In Europe, globalisation and integration in parallel to the introduction of the euro Several local marketplaces => international profitoriented public companies The world of trading is becoming a truly global place e.g. NYSE-Euronext, NASDAQ OMX Group Andres Sutt Capital market integration where is the limit? 4

5 Implications of globalisation and integration (1) - Integrated securities markets - interest to the market and its stakeholders - investors, issuers (financing of SMEs still costly, but essential in small economies) - important for the public sector - Facilitate cross-border securities trading - declining costs and a more liquid market with a wider range of products generates efficiency and contributes to economic growth Andres Sutt Capital market integration where is the limit? 5

6 Implications of globalisation and integration (2) - Small marketplaces (e.g. Baltics) benefit more at the beginning of the integration process - Integrating small marketplaces and their infrastructures in regional (Baltic) towards more international (Nordic, EU etc) level essential in order not to loose out - Disappearance of national infrastructures in integration and globalisation process inevitable Andres Sutt Capital market integration where is the limit? 6

7 Key factors in the capital market integration Market infrastructures, i.e. integration of securities trading, clearing and settlement systems. European securities market infrastructures - more fragmented and less effective than in the US The Giovannini reports outlined 15 different barriers recent global financial turmoil highlighted a new barrier to integration - absence of financial stability framework Andres Sutt Capital market integration where is the limit? 7

8 Financial stability perspective

9 Financial stability perspective (1) Balance between integration and financial stability objectives essential Integrated financial markets more resilient, but require stability arrangements arrangements for EU banking sector leading the way Risk of inconsistency between integrated markets and nationally-based stability arrangements Securities markets not typically associated with systemic risk, but infrastructures can be systemically important/relevant Andres Sutt Capital market integration where is the limit? 9

10 Financial stability perspective (2) Systemic risk more of an issue as infrastructures transformed from public to private utilities Integration of clearing and settlement systems highlights national differences in risk management procedures within infrastructures Reform of EU stability arrangements already underway but still playing catch-up with financialmarket developments Andres Sutt Capital market integration where is the limit? 10

11 Challenges for overseers and supervisors Greater cooperation across borders (formal MoU at EU level) Among overseers (informal cooperation at Nordic-Baltic level) Among supervisors Greater cooperation across authorities Between overseers and supervisors Andres Sutt Capital market integration where is the limit? 11

12 A way forward

13 A way forward (1) Further consolidation in 5-10 years perspective major marketplaces in the global market Key considerations in order to be competitive At the international level - covering of global markets by the single access point At the regional level Baltic market integration in accordance with solutions in Nordic market and in NasdaqOMX in general Andres Sutt Capital market integration where is the limit? 13

14 A way forward (2) Increased emphasis on rapid integration at the European level private and public sector initiatives, e.g. TARGET2- Securities, LinkUp Markets, etc. International financial stability arrangements essential including supervisory arrangements, crisis management, cooperation between overseers and supervisors Andres Sutt Capital market integration where is the limit? 14

15 Thank you! Questions? Andres Sutt Capital market integration where is the limit? 15