With the pandemic triggering intensified economic and financial stimulus by governments across the world, regulators and banks consider they fulfilled their mission of ensuring liquidity to the markets, but the way to emerge from the crisis will rely on a mix of policies, according to the participants of an online session at the World Economic Forum today.
Entitled Strengthening the Financial and Monetary System and hosted by Francine Lacqua, Editor-at-Large and Presenter at Bloomberg Television, the panel discussion provided a platform for representatives of legacy finance and regulators to present their views on the current health of the global financial system.
As central banks’ representative in the discussion, François Villeroy de Galhau, Governor of the Bank of France, said it is time to fully implement Basel III, a set of measures developed by the Basel Committee on Banking Supervision in the aftermath of the previous financial crisis to be implemented internationally.
“In the case of fiscal and monetary [policies], I’m in favor of a flexible couple. Today, we shouldn’t take things for granted for the next decades,” the governor said.
Meanwhile, Jes Staley, Group Chief Executive Officer at Barclays, said that the banks were a catalyst for the financial crisis of 2008, and that the current downturn required a different set of economic policies.
“The government response to this pandemic and its resulting economic crisis is much different from what we saw in 2008 and 2009,” Staley said.
According to Barclays’ CEO, we are now witnessing an “unprecedented fiscal response,” with central banks using instruments to buy corporate bonds and mortgage securities, among others, to inject unprecedented liquidity into the markets.
“If you go back to the Spanish flu … what that led to was the roaring twenties. There was just an explosion of demand coming out of that,” Staley said, forecasting that, as consumers and small businesses were cutting consumption and building up financial reserves, this could “lead to pretty strong economic growth.”
However, Kewsong Lee, Chief Executive Officer at investment management firm The Carlyle Group, said that the “banking system was very healthy right now,” but the question at hand was “how do we get the economy going again”.
“You may have some insolvent companies which are liquid due to what happened over the past year,” Lee said, stating this was the exact opposite of the situation that often took place during the previous global financial crisis, with many liquid companies sliding towards insolvency.
Meanwhile, Mary Callahan Erdoes, Chief Executive Officer for Asset and Wealth Management at JPMorgan Chase & Co., said that “we used every acronym we invented back in 2008 … and the liquidity and capital were not the question.”
“Asset bubbles come and go,” Erdoes said, naming the latest surge of bitcoin (BTC) as one of such potential bubbles, but claiming that such events did not have the capacity to impact on the overall recovery of the global economy.
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