2017 SYMPOSIUM ON BUILDING THE FINANCIAL SYSTEM OF THE 21 ST CENTURY: AN AGENDA FOR LATIN AMERICA AND THE UNITED STATES

Transcription

1 2017 SYMPOSIUM ON BUILDING THE FINANCIAL SYSTEM OF THE 21 ST CENTURY: AN AGENDA FOR LATIN AMERICA AND THE UNITED STATES Harvard Law School December 8-10, 2017

2 Session 1: Capital Markets and Meeting the Needs of the Real Economy

3 Capital Markets and the Real Economy Are capital markets fulfilling their potential? Ideal: Fast, cheap, easy Reality: Often slow, expensive, complicated Key underserved sectors SME financing Infrastructure financing Investor base Concentration of institutional investors Retail investors remain wary Role of financial education Investment products suitability and costs Bank deposits may seem like a better bet Quality Information Price discovery

4 Obstacles to Issuance High fixed costs Reduces usefulness for SMEs, investments Regulation Lack of competition high commissions Corporate governance and disclosure Investors require, but families (and SOEs) don t like! Loss of control Costs of reorganization Tax scrutiny Enforcement of the rule of law Bankruptcy law Minority protection Can OECD membership promote corporate governance practices?

5 Addressing the Needs of SMEs Why SMEs are not going to capital markets? Interest rate environment Bank deposits and government bonds offer high, safe returns High costs of issuance Heightened scrutiny by investors and regulators Is there investor demand? Institutional investors mostly not interested Lack of confidence in information Alternative mechanisms Novo Mercado model Funds, securitization, etc. Crowdfunding and fintech Are private markets a solution?

6 Other Issues Latin American markets suffer from overconcentration Both buy and sell sides Role of pension funds (and buy-and-hold strategies) Effects on liquidity and price disclosure Cross-border investing Small markets need cross-border investment opportunities, foreign investors Political/legal challenges Is fintech a solution? Can it reduce costs? Can it increase competition in oligopolistic markets? But risks remain unknown

7 Session 2: The G20 Financial Reform Agenda and Latin America

8 The G20 Agenda Basel III Is it good or bad for growth, stability, resilience? Should it be applied universally, or limited to original intention? Is it appropriate for Latin America? Adoption of global standards as signal to investors G20 Effects Concentration, especially in banking KYC/AML has led de-risking, with negative effects on inclusion Credit activities shifting to shadow banking Divergent enforcement (e.g., gold plating) Is pendulum shifting back to growth orientation?

9 Regulation and Regulatory Challenges Regulatory principles The four I s: Innovation, Independence, Inclusion, Integration Transparency Cost-benefit analysis Concentration Latin American financial systems highly concentrated G20 agenda => growing concentration globally Return of too big to fail, too big to manage, too big to regulate? How to ensure access and competition in oligopolistic markets? Should we break up banks?

10 Emerging Regulatory Issues Infrastructure finance Basel III restrictions How should infrastructure be regulated as asset class? Need for coordination of tax policy and regulation Tax systems may disadvantage capital market investment E.g., Brazil advantages dividends over capital gains Addressing double taxation for foreign investors Regulating fintechs and emerging tech practices Are fintechs FIs or tech firms? Will successful fintechs be forced from the sandbox? How to regulate operational risk from platforms and data services? Cross-border data transfer: data privacy, protection rules Cyber security and data protection

11 International Issues Trump effects Trade agenda may harm Latin American economies Financial regulation Will it be Trump s way or the highway? Or will lack of US interest in ambitious cooperation give policy space to Latin American regulators? Global cooperation Concerns over extraterritoriality by EU, US Could FSB mediate US-EU disputes? Argentine presidency of G20 Congratulations! Will Argentina champion emerging market agenda? Infrastructure, inclusion, equity Where is Pacific Alliance headed?

12 UPCOMING EVENTS 2018 Europe - U.S. Symposium April 11 13, Armonk, NY China - U.S. Symposium June 6 8, Guangzhou, China To receive an invitation to other PIFS Symposia, or to recommend a colleague for participation, please contact James Shipton: jshipton@law.harvard.edu

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