Lisbon by night
26 June 2018
ISLA鈥檚 27th Annual 网爆吃瓜 Finance and Collateral Management Conference saw a record number of delegates, as Brexit dominated the discussion
Image: Shutterstock
The International 网爆吃瓜 Lending Association鈥檚 (ISLA) 27th Annual 网爆吃瓜 Finance and Collateral Management Conference saw more than 600 delegates arrive in Lisbon for three days of informative discussion and lively debate.
In his welcome remarks, ISLA CEO Andrew Dyson, said that the conference, ISLA鈥檚 largest to date, aimed to both inform and challenge delegates.
Dyson said that the association wanted to show delegates what it had been doing over the past year, but also wanted to promote thoughtful discussion.
He explained that events like ISLA鈥檚 annual conference work best when you hear more from the delegates than the speakers.
In the opening keynote speech, Gabriela Figueiredo Dias, chairperson of Portugal鈥檚 网爆吃瓜 Market Commission, said that financial markets must 鈥渞eassure鈥� people of their reliability and 鈥渞ebuild trust鈥� in the coming years.
Figueiredo Dias said that this was one of the 鈥渒ey trends鈥� the financial services industry would be seeing.
She explained: 鈥淚n general, we as the financial sector are perceived to have failed the global economy at the beginning of
the century.鈥�
鈥淲e must now show that lessons have been learned and that we can build an efficient financial system. This is our most valuable contribution to unlocking the potential growth of our economies. We need to reassure people of the reliability of the financial markets,鈥� noting that this was particularly important for Europe.
In Europe, Figueiredo Dias said there were already some positives, with the continent moving towards a market focused economy.
鈥淚n the securities lending market, despite some quarterly episodes, the end of 2017 was much less tumultuous than the year before. This was welcome considering the changing regulatory environment that we are facing. In Europe, the worst of the crisis is now behind us.鈥�
However, Figueiredo Dias noted that despite these positive trends, the level of uncertainty remains particularly high, with growth momentum stabilising, while private and public debt continue to cast a shadow.
The dominating theme of this year鈥檚 conference was, as usual, Brexit, with speakers and delegates alike discussing the political impact of the UK鈥檚 vote to leave the EU, as well as the ramifications for regulation and the industry.
In one session, panellists discussed how a lot of the capital that could be used to innovate, is being used to 鈥渕aintain the status quo鈥�, as a result of Brexit.
Panellists included James Knightley of ING, Ed Bracken of Morgan Stanley, Stephen Fisher of BlackRock, Matthias Graulich of Deutsche Boerse, Michael Huertas of Dentons and Hubertus Vaeth of Frankfurt Main Finance.
One panellist said: 鈥淲e鈥檙e putting a lot of capital in to preserve the status quo, in an environment where, even with equivalence, its effectiveness may be dampened by certain EU member states that will demand that you have to have an office on the ground.鈥�
Panellists explained that equivalence is something that the UK has been pushing to effectively secure access from London to the continent, but they noted that the shape of EU policy will 鈥渃hange without the UK鈥�.
The UK has brought many proposals relating to financial services to the EU, which one panellist said would 鈥渘ot have seen the light of day鈥� otherwise.
Another panellist noted London鈥檚 place as the financial capital of Europe, where everything sat under one regime and framework, with 95 percent of financial business taking place in London.
He noted that, post-Brexit, these regulatory frameworks will no longer apply and will be something that the EU is looking at as a
potential concern.
The panellist explained that in 2008 the EU saw that financial services could be a big threat if something goes wrong, and a lack of regulatory control would 鈥渉ardly be acceptable from an EU perspective鈥�, given the breadth of the UK鈥檚 financial services industry.
A panellist said that regulators have an 鈥渙verarching objective of client protection鈥�, but politics gets in the way of these solutions.
On the topic of politics, another panellist said that it is 鈥渋ncredibly worrying鈥� that the UK Government has remained quiet about the financial services industry in relation to its Brexit strategy, while financial services lead as the UK鈥檚 biggest export.
The speaker explained that despite the UK doing better than initial forecasts after the referendum, economic growth in 2018 is expected to be the 鈥渨orst since the global financial crisis鈥�, at 1.5 percent.
The speaker added that a transitional deal may not be long enough and the UK could likely apply to rejoin the EU by 2027.
Another panellist opined that it was difficult to see what the opportunities of Brexit are, but noted that his clients may begin to see a more 鈥渓ocal touch鈥� in Europe.
However, it was not all doom and gloom, with another panellist explaining that the UK government will be able to cement its own trade deals.
He compared the Frankfurt and London arrangement to Japan and Hong Kong, where Japan is a tightly regulated environment, while Hong Kong looks to the rest of the world.
Another panellist said that in the same way Frankfurt opened its doors the day after the Brexit referendum, Hong Kong has been 鈥渁ctively trying to get businesses to relocate there鈥�. He added: 鈥淚 don鈥檛 think it鈥檚 fully manifested itself yet, but there鈥檚 potential for now.鈥�
On Frankfurt, discussions were abound over whether Frankfurt would become the new European financial hub, post-Brexit.
Panellists offered multiple opinions on this, with some arguing that an industry move is a tough project, while others claimed that there was little to no alternative.
One panellist explained that convincing people to move to Frankfurt will be 鈥渄ifficult鈥�, with a 鈥渢op to bottom review鈥� of all processes.
The panellist said that this would not be an easy process, as 鈥渁nything that big has a lot of complexity to it鈥�.
Another panellist added that it was unlikely that 鈥�100,000 bankers鈥� would move to Frankfurt, but noted that various firms have been setting up 鈥渋nterim solutions鈥�, where they set up an office with 鈥�15 people and a server鈥�.
The panellist said that these interim solutions are causing 鈥渢rust issues鈥�, as the European Central Bank was expecting 鈥渓arge groups of employees to come over鈥�.
He said that UK firms are looking to transition over a longer period because 鈥渨e can鈥檛 expect a large number of people to move over to Europe鈥�.
What is important, he says, is that UK firms should be 鈥渙pen鈥� and explain they are looking to transition over a long period of time.
Another panellist explained that Frankfurt is the ideal place to set up in Europe as it 鈥渕irrors London鈥�.
鈥淔rankfurt is the seventh most liveable city in the world, it has the market infrastructure and a talent pool.鈥�
The panellist explained that people are 鈥渕oving ahead, getting ready and taking this very seriously鈥�.
鈥淣o one wants to let us fall out without a transition deal. But if you look at recent history, who would have thought that Donald Trump would become president of the US?鈥�
鈥淩elying on hopes and feelings is totally inappropriate at this time and the focus should be on preparing for the worst.鈥�
Another panellist said that Brexit might provide the opportunity for firms to build up around new infrastructures and technologies, with the masters of these areas becoming the 鈥渨inners鈥�.
Panellists were asked what, post-Brexit, the UK can rip up from EU legislation that will really benefit London鈥檚 financial centre, but the majority of them agreed that it was 鈥渕ore about amending than ripping chunks out of the rulebook鈥�.
One panellist explained: 鈥淚f we live in a world where sovereign states are committed to what they have signed in the past, the UK can amend certain aspects, but they can鈥檛 completely depart from the principles it signed up to.鈥�
鈥淭he policy makers of the EU have a very strong impetus to ensure that the UK remains an equal partner.鈥�
鈥淭he rest of the world鈥檚 business will be done out of London. If we want equivalence, we have to keep the rulebook pretty much aligned.鈥�
Brexit was not all that was discussed, however, and in an insightful session from Bertrand Huet, senior vice president, partner, and co-head of Financial Services at FleishmanHillard, explained how the 鈥済hosts鈥� of the 2011 sovereign debt crisis are 鈥渂ack in the heads of the people in Brussels鈥�.
Huet said that this fear was a result of the market reaction to recent elections in Italy earlier this year and contagion concerns.
The elections were held on 4 March 2018 after Italy鈥檚 parliament was dissolved by ex-president Sergio Mattarella in December 2017 and resulted in the League, a centre-right coalition led by Matteo Salvini, coming into power.
Under Salvini, the party has, to some extent, embraced Italian nationalism and emphasised Euroscepticism and opposition to immigration, he said.
The party has historically advocated the transformation of Italy into a federal state, fiscal federalism and greater regional autonomy, especially for Northern regions.
Huet said that the Italian elections are a 鈥渞eminder鈥� that populism in Europe didn鈥檛 end with French president Emmanuel Macron鈥檚 defeat of Marine Le Pen last year.
Huet noted that Europe 鈥渟till has another nine elections in the next year and a half鈥�.
鈥淔orget Brexit, what鈥檚 most concerning for the EU leadership is that the Italian government is showing an intention, perhaps not to leave the euro, but certainly to divide Europe, as can be seen from the migration.鈥�
In his welcome remarks, ISLA CEO Andrew Dyson, said that the conference, ISLA鈥檚 largest to date, aimed to both inform and challenge delegates.
Dyson said that the association wanted to show delegates what it had been doing over the past year, but also wanted to promote thoughtful discussion.
He explained that events like ISLA鈥檚 annual conference work best when you hear more from the delegates than the speakers.
In the opening keynote speech, Gabriela Figueiredo Dias, chairperson of Portugal鈥檚 网爆吃瓜 Market Commission, said that financial markets must 鈥渞eassure鈥� people of their reliability and 鈥渞ebuild trust鈥� in the coming years.
Figueiredo Dias said that this was one of the 鈥渒ey trends鈥� the financial services industry would be seeing.
She explained: 鈥淚n general, we as the financial sector are perceived to have failed the global economy at the beginning of
the century.鈥�
鈥淲e must now show that lessons have been learned and that we can build an efficient financial system. This is our most valuable contribution to unlocking the potential growth of our economies. We need to reassure people of the reliability of the financial markets,鈥� noting that this was particularly important for Europe.
In Europe, Figueiredo Dias said there were already some positives, with the continent moving towards a market focused economy.
鈥淚n the securities lending market, despite some quarterly episodes, the end of 2017 was much less tumultuous than the year before. This was welcome considering the changing regulatory environment that we are facing. In Europe, the worst of the crisis is now behind us.鈥�
However, Figueiredo Dias noted that despite these positive trends, the level of uncertainty remains particularly high, with growth momentum stabilising, while private and public debt continue to cast a shadow.
The dominating theme of this year鈥檚 conference was, as usual, Brexit, with speakers and delegates alike discussing the political impact of the UK鈥檚 vote to leave the EU, as well as the ramifications for regulation and the industry.
In one session, panellists discussed how a lot of the capital that could be used to innovate, is being used to 鈥渕aintain the status quo鈥�, as a result of Brexit.
Panellists included James Knightley of ING, Ed Bracken of Morgan Stanley, Stephen Fisher of BlackRock, Matthias Graulich of Deutsche Boerse, Michael Huertas of Dentons and Hubertus Vaeth of Frankfurt Main Finance.
One panellist said: 鈥淲e鈥檙e putting a lot of capital in to preserve the status quo, in an environment where, even with equivalence, its effectiveness may be dampened by certain EU member states that will demand that you have to have an office on the ground.鈥�
Panellists explained that equivalence is something that the UK has been pushing to effectively secure access from London to the continent, but they noted that the shape of EU policy will 鈥渃hange without the UK鈥�.
The UK has brought many proposals relating to financial services to the EU, which one panellist said would 鈥渘ot have seen the light of day鈥� otherwise.
Another panellist noted London鈥檚 place as the financial capital of Europe, where everything sat under one regime and framework, with 95 percent of financial business taking place in London.
He noted that, post-Brexit, these regulatory frameworks will no longer apply and will be something that the EU is looking at as a
potential concern.
The panellist explained that in 2008 the EU saw that financial services could be a big threat if something goes wrong, and a lack of regulatory control would 鈥渉ardly be acceptable from an EU perspective鈥�, given the breadth of the UK鈥檚 financial services industry.
A panellist said that regulators have an 鈥渙verarching objective of client protection鈥�, but politics gets in the way of these solutions.
On the topic of politics, another panellist said that it is 鈥渋ncredibly worrying鈥� that the UK Government has remained quiet about the financial services industry in relation to its Brexit strategy, while financial services lead as the UK鈥檚 biggest export.
The speaker explained that despite the UK doing better than initial forecasts after the referendum, economic growth in 2018 is expected to be the 鈥渨orst since the global financial crisis鈥�, at 1.5 percent.
The speaker added that a transitional deal may not be long enough and the UK could likely apply to rejoin the EU by 2027.
Another panellist opined that it was difficult to see what the opportunities of Brexit are, but noted that his clients may begin to see a more 鈥渓ocal touch鈥� in Europe.
However, it was not all doom and gloom, with another panellist explaining that the UK government will be able to cement its own trade deals.
He compared the Frankfurt and London arrangement to Japan and Hong Kong, where Japan is a tightly regulated environment, while Hong Kong looks to the rest of the world.
Another panellist said that in the same way Frankfurt opened its doors the day after the Brexit referendum, Hong Kong has been 鈥渁ctively trying to get businesses to relocate there鈥�. He added: 鈥淚 don鈥檛 think it鈥檚 fully manifested itself yet, but there鈥檚 potential for now.鈥�
On Frankfurt, discussions were abound over whether Frankfurt would become the new European financial hub, post-Brexit.
Panellists offered multiple opinions on this, with some arguing that an industry move is a tough project, while others claimed that there was little to no alternative.
One panellist explained that convincing people to move to Frankfurt will be 鈥渄ifficult鈥�, with a 鈥渢op to bottom review鈥� of all processes.
The panellist said that this would not be an easy process, as 鈥渁nything that big has a lot of complexity to it鈥�.
Another panellist added that it was unlikely that 鈥�100,000 bankers鈥� would move to Frankfurt, but noted that various firms have been setting up 鈥渋nterim solutions鈥�, where they set up an office with 鈥�15 people and a server鈥�.
The panellist said that these interim solutions are causing 鈥渢rust issues鈥�, as the European Central Bank was expecting 鈥渓arge groups of employees to come over鈥�.
He said that UK firms are looking to transition over a longer period because 鈥渨e can鈥檛 expect a large number of people to move over to Europe鈥�.
What is important, he says, is that UK firms should be 鈥渙pen鈥� and explain they are looking to transition over a long period of time.
Another panellist explained that Frankfurt is the ideal place to set up in Europe as it 鈥渕irrors London鈥�.
鈥淔rankfurt is the seventh most liveable city in the world, it has the market infrastructure and a talent pool.鈥�
The panellist explained that people are 鈥渕oving ahead, getting ready and taking this very seriously鈥�.
鈥淣o one wants to let us fall out without a transition deal. But if you look at recent history, who would have thought that Donald Trump would become president of the US?鈥�
鈥淩elying on hopes and feelings is totally inappropriate at this time and the focus should be on preparing for the worst.鈥�
Another panellist said that Brexit might provide the opportunity for firms to build up around new infrastructures and technologies, with the masters of these areas becoming the 鈥渨inners鈥�.
Panellists were asked what, post-Brexit, the UK can rip up from EU legislation that will really benefit London鈥檚 financial centre, but the majority of them agreed that it was 鈥渕ore about amending than ripping chunks out of the rulebook鈥�.
One panellist explained: 鈥淚f we live in a world where sovereign states are committed to what they have signed in the past, the UK can amend certain aspects, but they can鈥檛 completely depart from the principles it signed up to.鈥�
鈥淭he policy makers of the EU have a very strong impetus to ensure that the UK remains an equal partner.鈥�
鈥淭he rest of the world鈥檚 business will be done out of London. If we want equivalence, we have to keep the rulebook pretty much aligned.鈥�
Brexit was not all that was discussed, however, and in an insightful session from Bertrand Huet, senior vice president, partner, and co-head of Financial Services at FleishmanHillard, explained how the 鈥済hosts鈥� of the 2011 sovereign debt crisis are 鈥渂ack in the heads of the people in Brussels鈥�.
Huet said that this fear was a result of the market reaction to recent elections in Italy earlier this year and contagion concerns.
The elections were held on 4 March 2018 after Italy鈥檚 parliament was dissolved by ex-president Sergio Mattarella in December 2017 and resulted in the League, a centre-right coalition led by Matteo Salvini, coming into power.
Under Salvini, the party has, to some extent, embraced Italian nationalism and emphasised Euroscepticism and opposition to immigration, he said.
The party has historically advocated the transformation of Italy into a federal state, fiscal federalism and greater regional autonomy, especially for Northern regions.
Huet said that the Italian elections are a 鈥渞eminder鈥� that populism in Europe didn鈥檛 end with French president Emmanuel Macron鈥檚 defeat of Marine Le Pen last year.
Huet noted that Europe 鈥渟till has another nine elections in the next year and a half鈥�.
鈥淔orget Brexit, what鈥檚 most concerning for the EU leadership is that the Italian government is showing an intention, perhaps not to leave the euro, but certainly to divide Europe, as can be seen from the migration.鈥�
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