Ch 3. The merits of specialisation – International financial centres

Ch 3. The merits of specialisation – International financial centres

Trying to understand what is the best model for some of the financial centers around the world and to use in the future so whether the centralized and universal let’s call it model should be the one that people should sort after or perhaps everybody should just move towards a small specialized niche markets what are yours i think none of us are going to be beating

Sort of london in new york anytime soon or but i think it is important for a center to have particular strengths you know and with with toronto with canada’s financial center it’s very much the financing and the for mining metals energy cleantech financing the talent pool around that the expertise commodity based economy whatever so i mean that’s certainly one of

Our clear strengths but i think one of the other things that also helps the sector is the ability to have some bread than some depth and so you know we have the strength and pension and asset management as well we have a talent base that is very diverse and is seen in governments again recognize the importance of building that talent base through the educational

Schools etc but again it’s also a talent base that has the kind of business cultural linguistic ties globally because we have you know like over half the people in the city of toronto were born in other countries very diverse economy or people talent base over 180 languages spoken within the city etc so recognition about the need for that as well as the macroeconomic

Values that are really really important i think they naturally attract a breath in terms of skills and they’ll look there’ll be the different service providers that need to come in and support the industry and then the companies that support them so they will naturally be a bit of that but but to really to focus on and support a niche if we want to call it that or

A specialization or a couple we then the financial services sector which at the end of the day is so broad to say financial services sector in itself can be misleading in terms of what you what you want to focus on so if you if you do recognize where that niches and and you know for our region it’s very much around asset management because the majority of the 1.7

Trillion that’s in super funds in in australia is managed out of melbourne and to i think there are so many advantages in that so to move away from trying to be all things to all people and actually recognize we want to do one or two things really well means that for your talent pool you are naturally investing in those skills that are going to assist and help

You grow that part of the sector you are going to naturally start to attract more global participants into that sector because they can see that cluster about that specialization within the cluster growing and then from a promotion point of view it really makes it a lot easier as well at the end of the day the world is we live now in a global world we’re all

Competing against each other in some way whether it’s on a resources platform or a financial services platform where we can genuinely find those niches and invest in them and know that as a global community we’re all actually making that pie bigger and better i guess is what we’re all aiming towards rather than trying to continually cannibalize a sector should

London be worried about all these financial centres specializing in some of nicias and potentially getting a part of the financial sector out of the capital quite the opposite actually we’ve we’ve just signed a memorandum of understanding with moscow to help the development of their financial center we’re working very closely with this dumb bull on theirs and

What we’re trying to do is is help the world’s financial services centres grow because of course at as was being said earlier financial services is the bridge actually we are that we are the bridge between an aspiration to grow and growth actually occurring and so we see it as part of our role to help the development of the industry around the world and what and

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What london’s been doing actually i mean again just speaking for for the toronto financial sector wasn’t very very helpful there was a series of studies that were done some you years ago about what financial center needs to build and to grow and now we’ve got the global financial centers index that’s out there talking about where we all rank from time to time and

We we also had had signed a memorandum of understanding with af at the old i fsl and again that cooperation that sharing of information that willingness to come and help us grow and toronto was was you know not i don’t think anybody saw toronto financial services as a global center and then two things i think you know that the success during the crisis if i can

Say that i think helped put us on the map but secondly the learnings that we had from the relationship with i fsl you know and now you know you look at the index and and toronto and again it’s an index and they can they can fluctuate quite a bit but you know we take some pride in being sort of in the top ten yes good beer for them and you know i know i know and

Actually well actually what we really because the first the first index that came out we were about twelfth i think and and the report actually sort of said something about surprisingly toronto was you know like who knew so within them that’s right there on thurs actually like amanda is a very strong finish yeah especially after after the ladies and you may seem

That the bank is also put together ranking of international financial scientists with them with some the way a few surprises were seventeen or seventh in that but we’d benefit i mean i think what’s what’s really important is that it that mutual benefit has helped us grow and and where we got from from from london new york and and we look forward to we’ve been

Doing some stuff with mumbai so we look forward to continuing that kind of partnership a relationship vehicle the model seems to be very clearly that the top three now almost financial centers the full service financial centers if you may in new york london hong kong they’re going to stay the bb or at least the way we look at it is they’re going to stay these

Full center financial services and they’re going to be fed by a host of regional focused niche oriented specialized centers and i think the the responsibility of these niche centers would be to grow the size of the pie for everybody our own experience since 2010 when we announced our hub strategies and the focus and asset management reinsurance and captives so

In the same indices we’ve seen kathir creep up slowly because especially it was the developing side but you’re still building out that legal infrastructure the regulatory infrastructure the tax environment in still working in that environment it’s it’s it’s important to be able to also focus the regulators and the policymakers on rather niche sectors rather than

The entire financial services that it’s difficult to sometimes to find goren’s and that focus sometimes helps attract the world’s attention gets the right people from that industry globally involved and work with other stakeholders in the country to help build that up so they’re definitely i can see that at leavin from our side the model that we seem to be all

Talking about is very similar facing seven well those those rankings are interesting because well the awesome beauty contest and obviously we’re very happy you’re proud and we when we go up few positions or when we when we are loaded with lowered a few a few ranks but so again you develop expertise and if you don’t have it you build partnerships with centers or

With banks or with specialized firms if we are finding mining financing mine which we will call you janet because we are absolutely no expertise in geneva i believe except we know how to finance the transaction of the the silver of the goal of the grains and the sugar to some other destinations but that’s where we can be complimentary and so i see it as niche but

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Complementary in the action so some so it’s one part competition and other parties cooperation they know i’m selective competition construct the comfort let’s cook i think it’s called co-op petition or something there’s a new word and i’m here yeah there’s a new word that something coin to cover it and there are new products as well i mean as the industry grows

And certainly with the carbon tax being introduced into australia as we see the growth of of products regulation trading platforms etc it we need those combined skills to come together and that’s certainly something we’re very focused on at the moment is is making sure that we’ve got the right capability and capacity again to support what’s going to be and it’s

Already as an emerging new sub sector within financial services so as we see new products then can’t even imagine what’s going to come out in terms of new products after this latest round of sovereign debt issues got to come up with something there is space for innovation though they take islamic finance the uk’s the western world’s leader in islamic finance already

And yet that’s a sector that’s really in the foothills of its development so i think there are a whole plethora of new and interesting areas that are going to be emerging over the next five to ten years which we can already start to see the development of today but it’s how quickly they leap ahead and that should be really encouraging for our our politicians who

Are worrying about or where is the growth going to come from industry is usually very good you know necessity breeds innovation or invention as they say so we need to allow industry enough room to actually and this is this is what some are warriors a moment it’s innovation might be stopped for fear and that is a valid there’s a valid concern but it also i mean if

If the financial sector is allowed to let that creativity in that innovation go on for example in canada now i mean with we have you know a very strong pension system nationally and some very significant retired or pension funds who are out sort of you know becoming growing global players but that whole concern around retirement income options for citizens like

A lot of countries as you know the population is getting a little older and we’ve actually are in the process of developing a new pension product pooled retirement pension plans it’s called so that smaller employers have an opportunity to provide pension plans of some kind for their employees because we all know the pressure that defined benefit plans have been

Have been experiencing so that allowing that innovation to go allowing that cooperation and knowledge that relationship between your policy makers regulators in the industry you know in canada like we’re creating a whole a whole new pension product which you know will benefit consumers will certainly benefit employers and small employers in terms of attracting and

Certainly is going to strengthen you know our already strong asset management to strengthen or more assets under management more jobs and more benefit for our consumers so it can work to the benefit of everybody once in a while and i think it’s chris said making sure that those success stories are told so that we can continue to allow that to happen new products and

Creativity certainly but we must make sure that they are understandable and what that was also an issue two or three years ago where a lots of customers were disappointed about that banking advises that they had purchased products that they really didn’t understand and to some extent did the banker so there was lots of rancor and it’s being addressed now because

The industry realizes it must be more i wanna say transparent it’s a matter of being a pedagogics plain things in matter-of-fact way you know can i just ask a little bit of a controversial question pipes you talk about making sure that the products that are created an insult and understood but then we seem to run or potentially i run in a similar situation with

The atf products which are now been created in a in a highly complex way that there are synthetics products and of course they are linked to waters up into tbs to the rock trade so are we at mobile and you enjoy just the way okay sorry to just look at you when i when i mentioned hs don’t yes of course of course so are we sure that so we are safe from the risk of

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Running into these issues again well i all i’d say is complexity is not necessarily a bad thing i don’t really understand how the combustion engine works in my car but i know that it works so i have confidence that the combustion engine actually has been tested to to the point of destruction if we can put it that way and is actually safe for me to for me to drive

So the simplicity of the product i can get into a car and drive it it shouldn’t shouldn’t be at the expense of understanding that there’s a very technical piece of engineering in the car so we have lots of discussions about or we need to simplicity of products and i think that can be a conveyer misleading description what we need is transparency and what we need

Is then accountability of organizations of individuals and a very good regulation but actually it does come down to the customer understanding what they’re buying and being and having an and the social utility of that product but that’s not a product recall in the financial services market so it’s also to do with the regulation that happens at each piece of that

Complexity because if you think about the process of putting a car together and and the regulation that goes oooh so i take the point definitely it doesn’t it’s not necessarily an evil thing and i’m sure the derivatives industry would agree with you absolutely who feel that they’ve really borne the brunt of the last one but nevertheless there’s got to be some

Simplicity at each point in how it actually all comes comes together well i think i think about that underlines to two important things that also need to happen in any jurisdiction one it’s your financial literacy of your population but i think the other factor is is your risk management it partly its regulation but unless you have a talent base within your sector

That understands risk management pays attention to risk management and is enabled to act on those judgments i think is is really really crucial because at the end of the day it’s those kind of individual judgments that are going to make or break your financial services system in corporate culture because even within having worked in a big bank you know you might

Have somebody that on the risk side that says hang on a moment but then if you’re too vicious cycle if ultimately your main aim is to get best returns for shareholders and they are often short-term aims as well particularly the way that the reporting and analysts system works with all due respect within within our sector it drives behaviors that are counter often

To what the risk management process is saying the consumer education part though is really important in somebody some recent survey work done in terms from a retail banking point of view on what’s the number-one motivating factor for people walking into a bank so we’re talking retail customers at the most basic level what do we think the number one motivating

Factor is now i couldn’t guess and everybody else around the table i couldn’t guess and it was fear for the retail customer walking in and we’ve all touched on a number of reasons why being ignorant or not understanding of being fearful of a whole system that for which they they don’t have the perceived requisite knowledge to really understand what they’re doing

Not having enough money not having the same money that they thought they had in the account because there’s been some catastrophe and their funds of have dwindled some whatever it may be it’s fear and it’s it’s a really a sad situation we’ve got ourselves to earn a real reflection i think of what’s happening in the market regulation politics etc but for a person

Walking into a bank their number one motivating factor is actually fear and that’s what they’re that’s the the fact that they’re using to make decisions

Transcribed from video
Ch 3. The merits of specialisation – International financial centres By The Banker