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Finance in a Changing World

Inaugural Finance Forum Webinar Explores Future of European Union
European Central Bank HQ at night
Inaugural Finance Forum Webinar Explores Future of European Union
By:  Oscar Tollast 

Panel of experts look at long-term consequences of a German European Central Bank ruling for the future of the European Union and Eurozone

A panel of experts examined the future of the European Union (EU) in the aftermath of a recent German European Central Bank ruling.

The Salzburg Global Finance Forum hosted an inaugural webinar on the topic on Thursday, July 2, with speakers Andreas Dombret, José Manuel González-Páramo, and Yves Mersch.

On May 5, Germany’s constitutional court ruled the European Central Bank’s quantitative easing program did not respect the “principle of proportionality.”

At a time when COVID-19 is straining cohesion in the EU and raising concerns over long-term recovery, panelists looked at what risks this ruling poses for the Union’s institutions and future viability.

Fellows from the Finance Forum and Salzburg Global Corporate Governance Forum were invited to take part in the discussion, which was held under the Chatham House Rule.

However, Mersch, a member of the Executive Board of the European Central Bank since 2012, has since published his opening remarks.

Building on the success of the first webinar, a second webinar on “Digital Infrastructure Resilience: Fostering Growth and Confronting New Challenges” will take place on Monday July 13.

The debate will feature panelists including: Lori Mitchell-Keller, vice president for industry solutions, Google Cloud; Peter Kerstens, advisor, European Commission; Michael Mosier, deputy director and digital innovation officer, U.S. Department of the Treasury/FinCEN; Katheryn Rosen, managing director, JP Morgan Chase (TBC).

Daniel Gorfine, founder and CEO of Gattaca Horizons, will moderate the discussion. Clare Shine, vice president and chief program officer at Salzburg Global, will provide welcome remarks.

During the webinar, participants will examine the critical role digital financial infrastructure can play in accelerating resilience, fostering growth and addressing inequality, which is crucial in the times of COVID-19. The program will also discuss existing institutional and policy gaps and address related risks around data security, privacy, and regulatory fragmentation. More information can be found here.

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In the Spirit of European Cooperation
Handshake illustration on board
In the Spirit of European Cooperation
By:  Yves Mersch 

Introductory remarks by Yves Mersch, member of the Executive Board of the ECB and vice-chair of the Supervisory Board of the ECB, at Salzburg Global Finance Forum webinar

This article was first published by the European Central Bank. Yves Mersch, member of the Executive Board of the European Central Bank and vice-chair of the Supervisory Board of the European Central Bank, made the remarks below at a webinar organized by the Salzburg Global Finance Forum on July 2.

The judgment of the German Federal Constitutional Court on the ECB’s public sector purchase programme (PSPP) is a reminder of the confederal nature of the European Union. The judges themselves noted that “certain tensions are […] inherent in the design of the European Union; they must be resolved in a cooperative manner, in keeping with the spirit of European integration, and mitigated through mutual respect and understanding.”[1]

In this spirit, the ECB – which is exclusively subject to the jurisdiction of the Court of Justice of the European Union and accountable to the European Parliament – supports the Deutsche Bundesbank in its cooperation with the German Federal Government and the Bundestag.

The Constitutional Court is of the view that the Federal Government and the Bundestag have a duty to ascertain that an assessment is conducted in relation to the proportionality of the PSPP. Bundesbank President Jens Weidmann thus recently requested that the ECB authorise the disclosure of a number of documents to those to whom the judgment is directed, namely the Federal Government, which may then share these documents with the Bundestag if necessary. We authorised the disclosure of these documents on the condition that their non-public elements are treated confidentially.

In 2018 the Court of Justice ruled unambiguously and finally on the legality of the ECB’s asset purchases. It also found that the ECB provided sufficient proportionality considerations.[2] The ECB’s Governing Council constantly evaluates the potential side effects of its monetary policy measures – including the PSPP. This evaluation is part of the proportionality assessment underpinning the ECB’s policy choices and is publicly available.

You can get an idea of what I am referring to from our latest accounts[3] (published last week), which show the depth and comprehensiveness of the Governing Council’s discussions, including on the effectiveness, efficiency and potential side effects of our monetary policy decisions. This public evidence demonstrates that we take the potential risks and side effects of our decisions very seriously. And it should help with more balanced communication of our decisions in all countries, including Germany.

The German authorities have access to the answers to the 43 questions we received as technical experts in this case before the Constitutional Court. We have also authorised the disclosure of our extensive explanation on proportionality that we submitted to the Court of Justice as well as excerpts from minutes of Governing Council meetings.

The German authorities have assessed the PSPP as proportionate before the Constitutional Court. With the new documentation, they are in a position to further corroborate their initial finding if necessary.

Our authorisations respect and are consistent with the independence of the ECB and the Deutsche Bundesbank, the fact that the Bundesbank is an integral part of the Eurosystem, the primacy of EU law and the binding nature of judgments of the Court of Justice of the European Union. And they are in the spirit of European cooperation.

I see no obstacle to the Bundesbank continuing its purchases under the PSPP after 5 August.

And I trust that my German colleagues share the spirit of European cooperation and will continue with their pro-European and constructive track record.

References

[1] Federal Constitutional Court (Bundesverfassungsgericht), Judgment of the Second Senate of 05 May 2020 - 2 BvR 859/15 -, para. 111.
[2] Judgment of the Court (Grand Chamber) of 11 December 2018, Weiss and Others, C-493/17, EU:C:2018:1000.
[3] Account of the monetary policy meeting of the Governing Council of the European Central Bank held in Frankfurt am Main on Wednesday and Thursday, 3-4 June 2020.

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Living Up to Your Reputation and Adding Value
Eugene “Gene” Ludwig speaking at Salzburg Global Seminar
Living Up to Your Reputation and Adding Value
By:  Mirabelle Morah and Oscar Tollast 

Eugene Ludwig, founder and CEO of Promontory Financial Group shares insight on building his reputation and the importance of implementing financial advice

“You build up your reputation, whether it's in the advisory space or another space by working hard, trying to know what you're saying [and] adding value,” said Eugene “Gene” Ludwig, founder of Promontory Financial Group, sitting in Max Reinhardt’s former office at Schloss Leopoldskron.

Ludwig founded Promontory Financial Group in 2001, a global consulting firm which advises clients on a variety of financial services matters. Being reputed as a trusted advisor to many of the world’s leading financial companies, including serving as U.S. President Clinton administration’s point person on the successful policy response to the credit crunch of the early 1990s, Ludwig has grown to be highly knowledgeable in matters of finance.

Beginning his career as a banking lawyer doing transactional work, he later worked as a financial regulator starting in 1973. Building a reputation as a financial adviser is “a little like a trademark,” Ludwig said. According to him, many spend a lot of time looking for a symbol or a set of words that would make a brand or entity look good.

“That part of it really doesn't matter very much,” Ludwig explained. “What matters is what people learn to expect from the symbol or the words, in terms of the value-added or not [added] to them. Good marks are ones that they like, and they believe add value, whether it's a drink, a cosmetic [product] or a bank. So, marks are hard to build and easy to ruin. Your own business or your own persona is very much the same thing.”

In Ludwig’s case, building his reputation involved having empathy toward people “who have difficult circumstances, trying to figure out ways they can solve their problems in ethical and long term solutions.”

One of his core principles includes practicality. Growing up in a country town where his father was a doctor, planting tomatoes with his bare hands in the soil taught Ludwig “the importance of the application of theory to practice.”

Channeling the knowledge to the world of finance, when giving advice and ideas to entities, Ludwig noted the implementation of ideas is often “vastly more important than the idea itself.” Previously, he thought by giving large entities advice on their financial issues, they would go ahead and implement the ideas themselves and the problem would be solved.

“I realized after a time that the implementation of the advice was every bit as important as the advice itself and that regulators were uneven in their implementation skills,” Ludwig said. “So I've added to the group and indeed even worked with regulators to become more expert at implementing the advice they get.”

When a big diagnostic and advisory exercise reaches a conclusion, Ludwig often tells CEOs and boards what they’ve purchased from Promontory “has no value at all.” He said, “What I mean by that is that unless it's implemented… they haven't done very much.”

Ludwig was at Schloss Leopoldskron to co-chair the latest program of the Salzburg Global Finance Forum: Financial Services in the 2020s: Tectonic Shifts and New Landscapes. Among other topics, the response of the mid-noughties financial crisis and threat of another looming recession surfaced.

“Post the 2007 euphemistically called ‘great recession,’ regulators and governments did a lot of great things in a very difficult situation and reacted vastly better than we reacted after the 1929 stock market crash,” said Ludwig.

The profound effects of “both that crisis and the dramatic changes that are going on in our society” are driven at large by technology, indicated Ludwig. He recognized technology has brought about a rapid period of positive growth and change in the society, but these changes have also come with their own challenges, such as climate change and displaced populations. Nonetheless, Ludwig remained hopeful work at the Salzburg Global Finance Forum could help formulate new solutions.

“One of the things I think that is outstanding about the Salzburg Global [Finance] Forum [is] it gets together – at least in my experience in the last couple of days – people with different points of view, with certain amounts of expertise and global backgrounds. And those attributes taken together can, if organized correctly, add an uncommon amount of value to ultimately understanding a problem and then figuring out how to take action.”


The Salzburg Global Seminar program, Financial Services in the 2020s: Tectonic Shifts and New Landscapes, is part of the multi-year Salzburg Global Finance Forum. This year's program is being held in partnership with JP Morgan Chase & Co. and Oliver Wyman. The sponsors are Cleary Gottlieb, Davis Polk & Wardwell LLP, Raiffeisen. The co-sponsors are Bearing Point, European Banking Federation, Dynex Capital Inc., and State Street.

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Financial Services in the 2020s: Tectonic Shifts and New Landscapes
Financial Services in the 2020s: Tectonic Shifts and New Landscapes
By:  Salzburg Global Seminar 

Report from the latest program of the Salzburg Global Finance Forum now online

The geopolitical landscape and the global economy are going through tectonic shifts with the pace of global growth becoming less vigorous and balanced. Growing polarization and protectionist tendencies give rise to continuous economic, political and financial fragmentation. The increasing importance of environmental threats as a result of climate change and their potential impact on the long-term economic and financial stability lead to a growing relevance of sustainable finance and extensive and consistent environmental, social and governance (ESG)-related disclosure. 

Additionally, the rise of new technologies, the increased maturity of players like fintechs, and the entrance of large, established technology companies into financial services are transforming the financial system from a centralized framework into an open architecture. Emerging platforms and fundamental changes in the distribution mechanism of financial services result in a range of activities being offered outside of the core jurisdiction of banking regulators and create new regulatory challenges regarding contextual finance, privacy and data protection. 

The ninth session of the Salzburg Global Finance Forum Financial Services in the 2020s: Tectonic Shifts and New Landscapes – brought together stakeholders from different financial institutions, regulators, and policymakers around the world to discuss how new global trends and emerging risks are impacting and challenging society and financial markets and what consequences they imply for policy, regulation, and practitioners. 

The newly published report provides an executive summary of the discussions from the two-day session (June 23-25, 2019) at Schloss Leopoldskron in Salzburg, together with a list of all participants in attendance.

Download the report as a PDF

The deliberations of the 2019 program of the Salzburg Global Finance Forum demonstrate that a new economic and financial system is emerging driven by technology, demographics, social and political pressures, climate change risks and the environment. New challenges ahead require new finance, which will be more greatly rooted in society, more inclusive, more responsive to the new needs of the real economy, households and entrepreneurs, and better able to support the transition to sustainable development, as well as to serve emerging digital needs. All this must be achieved while still retaining trust and maintaining resilience. 

As the world of finance continues to change, the Forum’s future programs will tackle this new role of finance and explore the new implications and redefining possibilities in the banking and financial markets industry, which in turn could help enable a more sustainable and resilient economy. 


The Salzburg Global Seminar program, Financial Services in the 2020s: Tectonic Shifts and New Landscapes, is part of the multi-year Salzburg Global Finance Forum. This year's program is being held in partnership with JP Morgan Chase & Co. and Oliver Wyman. The sponsors are Cleary Gottlieb, Davis Polk & Wardwell LLP, Raiffeisen. The co-sponsors are Bearing Point, European Banking Federation, Dynex Capital Inc., and State Street.

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5 Risks the World Needs to Get Real About
5 Risks the World Needs to Get Real About
By:  Martín Silva Rey 

From climate change to the erosion of trust, the world is facing many challenges. Before we can find solutions we need to well-understand the problems

“The possibility of loss, injury, or other adverse or unwelcome circumstance; a chance or situation involving such possibility.” That is how the Oxford English Dictionary defines risk. As the planet warms and societies fracture, that possibility of loss is staring us in the face, and every field is seeking new ways to tackle new uncertainties. From finance to politics, and science to the arts, experts are trying to find the best answer to how we can get real on risk. But solutions require that we well-understand the problems. Here are five risks the world is facing in 2019.

A Backlash Against Globalization

US president Donald J. Trump has started a trade war, shaking the foundations of global trade. By raising tariffs and applying quotas, the world’s largest economy is attacking its three main partners – China, Canada and Mexico – which are also retaliating. Former Executive Chairman of the Securities Commission Malaysia Ranjit Ajit Singh explains this new situation questions “what have been the fundamental tenets of how capitalism is operating, this whole notion of free market, and the liberalization and deregulation that many countries have been on for the last 10-15 years…” He adds more countries now are taking this position, “championed by politicians and other parties who say ‘Well, it has to be our country first.’”

Climate Change Is Not a Cliché – It’s Happening

Many people see global warming as a problem of the future. Some world leaders even deny the existence of climate change. But the truth is sea levels are already rising, countries are at risk of disappearing, lakes are drying out – and that means millions of climate refugees. Realizing something is wrong with our natural world, people are starting to call on their governments the world over to take action. As the World Wildlife Fund states, “We must rethink the way we produce and consume energy, food, and water; protect the world’s forests; and help people prepare for a changing world.” Action is required now – not in 2050.

A Missing Pillar in Education

Countries need to embrace science in their pursuit of development. For that to happen, it is fundamental that citizens support such enterprise. However, according to the executive director of the African Academy of Science, Nelson Torto, “governments are not promoting science in Africa” – the world’s fastest growing continent. He explains that most of the population say they don’t see the importance of science, or they “don’t have an appreciation for science.” Then, if a government was to invest in science that would generally be seen as “a waste of money.” But that lack of science education runs the risk of those in positions to act not understanding how to tackle our greatest challenges.

Seismic Drifts Driven by Technology

As one of the fastest-growing industries, technology accelerates progress but is also accompanied by numerous emerging risks. Cybersecurity breaches have become commonplace, threatening businesses and governments. Their damages are estimated to reach a total of $6 trillion annually by 2021, so delaying hardware and software updates to save some money might not be the wisest choice. The constant pressure to innovate risks overlooking important concerns such as data privacy and security details as tech companies frantically create devices to fulfill the expectations of a growing market without considering the wider implications of their devices and apps, artificial intelligence and machine learning.

The Erosion of Trust

Leaders are facing new risks too. The demand for immediacy, the advancing tendency for automation, and a growing labor precarity are shaping movements of all kinds worldwide. The erosion of trust in traditional leadership structures makes it harder for political leaders to admit mistakes or encourage constructive dissent. If leaders are not open and humble enough, they risk being feared or hated, rather than trusted and respected. Today, the world is suffering from leaders who don’t know how to lead themselves – let alone the populace. As former director of the FBI James Comey once wrote, “Those leaders who never think they are wrong, who never question their judgments or perspectives, are a danger to the organizations and people they lead.”


All the people featured took part in Salzburg Global Seminar’s annual June Board Weekend 2019, Living Dangerously: How Do We Get Real About Risk?

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5 Ways AI is Changing our World for the Better
Image created live at the 2018 June Board Meeting of Salzburg Global Seminar using software developed by Ingo Hoffmann.
5 Ways AI is Changing our World for the Better
By:  Martín Silva Rey 

Man has long feared the rise of the machine – his own creation becoming smarter and more intelligent than he. But while artificial intelligence and machine learning are rapidly changing our world and powering the Fourth Industrial Revolution, humanity does not need to be afraid

Creating New Jobs

“Artificial intelligence will change the workforce,” affirms Carolyn Frantz, Microsoft’s Corporate Secretary. The bleak view of AI as a job killer is but one side of the coin: while 75 million jobs may disappear, as many as 133 million more engaging, less repetitive new roles are expected to be created. AI “is an opportunity for workers to focus on the parts of their jobs that may also be the most satisfying to them,” says Frantz.  

Bridging Language Divides

Whether it’s teaching new languages in a personalized way or translating speech and text in real-time, AI-powered language tools from Duolingo to Skype are bridging social and cultural divides in our workplaces, classrooms and everyday lives. Digital translation services are not “perfect,” admits Microsoft education leader Mark Sparvell, but “they offer a means of understanding” that might not otherwise be possible.

Transforming Government

Less paperwork, quicker responses, a more efficient bureaucracy – AI has the power to drastically change public administration, but are governments ready? This tech comes with both risks and opportunities that need to be understood and evaluated. Academic Kevin Desouza believes gamification and role-playing could be the key to public servants analyzing complex cases, coming up with better solutions, and truly understanding the future of autonomous systems.

Delivering Health Care

AI has the potential to make health care “much more accessible and more affordable,” insists Paul Bates, director of NHS services at Babylon Health. Babylon, an app that offers symptom checking and fast access to physicians if needed, is providing advice to more than one million residents in central London through an AI-powered chatbot. Patients can get an accurate, safe, and convenient answer in seconds – and save health care providers’ money too.

Creating Art

Computational creativity is drastically changing the nature of art. Software, more than a tool, is becoming a creative collaborator, merging computer scientist with artist. As Austrian artist Sonja Bäumel assures, “The exhibition space becomes a lab; art becomes an expression of science, and the artist is the researcher.”


All the people featured are Fellows of Salzburg Global Seminar.

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Financial Services in the 2020s - Tectonic Shifts and New Landscapes
Photo by M. B. M. on Unsplash
Financial Services in the 2020s - Tectonic Shifts and New Landscapes
By:  Oscar Tollast 

Latest program of the Salzburg Global Finance Forum to focus on key long-term trends and scenarios for financial services

Senior and rising leaders from financial services and regulatory authorities are among those attending the latest program of the Salzburg Global Finance Forum.

Financial Services in the 2020s: Tectonic Shifts and New Landscapes will convene participants for an intensive two-day session at Schloss Leopoldskron in Salzburg, Austria.

The program, which begins on June 23, will include panel-led discussions, in-depth working groups, and an Oxford-style evening debate entitled, “Resolved, a cashless society will decrease financial inclusion.”

Each day has an overarching title: The Changing World, Dealing with the Brave New World, and Global Coordination.

This year’s program is being co-chaired by Ashley Alder, CEO of the Hong Kong Securities and Futures Commission (SFC), and Gene Ludwig, founder and CEO of Promontory Financial Group.

During the program, participants will address a set of critical questions, which fall under four themes: geopolitical shifts and drivers of global change; long-term investments and sustainable finance; technology, digitalization and regulation, and international governance.

In a retreat-style atmosphere, the Forum will help facilitate candid, in-depth analysis of the strategic challenges and emerging risks identified by representatives from financial service firms, supervisory and regulatory authorities, public policy leaders, and professional service providers.

This year’s program will build on the existing work of the Forum, which tackles issues critical to financial markets, their participants, and global economic growth and stability. Last year’s program—The Promise and Perils of Technology: Artificial Intelligence, Big Data, Cybercrime and FinTech—offered valuable insights on the rapid and often disruptive development of technological advances, as well as the emergence of new players and business models.

Tatsiana Lintouskaya, program director at Salzburg Global Seminar, said, “This year’s program will look to the next decade and examine the shifts that are disrupting the financial services ecosystem and the existing regulatory frameworks. The discussion will delve deep into the new challenges and opportunities and will address the fault lines in the global financial system with the aim to make it more sustainable, effective, and resilient.”


The Salzburg Global Seminar program, Financial Services in the 2020s: Tectonic Shifts and New Landscapes, is part of the multi-year Salzburg Global Finance Forum. This year's program is being held in partnership with JP Morgan Chase & Co. and Oliver Wyman. The sponsors are Cleary Gottlieb, Davis Polk & Wardwell LLP, Raiffeisen. The co-sponsors are Bearing Point, European Banking Federation, Dynex Capital Inc., and State Street.

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