Salzburg Global Forum on Finance in a Changing World » Overview

The Salzburg Global Forum on Finance in a Changing World is an annual high-level program convened by Salzburg Global Seminar that addresses issues critical to the future of financial markets and global economy in the context of key global trends.

Established in 2011, the Forum offers senior and rising leaders from the financial industry and public sector an opportunity for in-depth, off-the-record conversations on how to build inclusive, open and resilient financial systems and set an agenda for the future.

The Forum’s overarching goal is to facilitate critical analysis of the changing financial landscape and regulatory environment, comparison of practical experience around the world, understanding of technology-driven transformations, and open dialogue on issues of trust and ethics. Each summer, it convenes an internationally representative group of leaders from financial services firms, supervisory and regulatory authorities, consultancies, auditors, law firms and other professional service providers who share a belief that inclusive, efficient and stable financial systems are essential for sustainable growth, shared economic opportunities and prosperity. Going forward, the Forum will continue to explore key developments, strategic shifts and tipping points in global finance, and to help participants learn practical lessons and share international insights.


Report now online Financing the Global Economy: How Can Traditional and Non-Traditional Sources Be Integrated?
Report now online Financing the Global Economy: How Can Traditional and Non-Traditional Sources Be Integrated?
Louise Hallman 
The report of this year’s session of the Salzburg Global Forum on Finance in a Changing World is now available online to read, download and share. Since 2011, Salzburg Global Seminar has held a series of high-level programs focusing on issues critical to the future of financial markets and global economic growth and stability. The 2016 session of the Salzburg Global Forum on Finance in a Changing World brought together over fifty bankers, policymakers, regulators and supervisors, representatives of financial services firms and alternative financial intermediaries, consultants and academics from across the globe for three intensive days to discuss: Financing the Global Economy: How Can Traditional and Non-Traditional Sources Be Integrated?  The key question governing deliberations of the three-day session at Schloss Leopoldskron was how to sustainably finance the global economy and growth using all available channels such as banks, market-based finance, fintech, and non-bank challengers, as well as policy banks, in a way which enhances the overall quality of finance while preserving stability.  The report, written by Silken Finken, professor of International Management at International School of Management (ISM) in Munich, Germany, summarizes discussions on a variety of topics, including:
  • Banks and Markets: Debt, Equity and Potential for the Economy
  • Capital Markets Across the Globe: Integration or Fragmentation?
  • Building Resilient and Effective Market-based Finance
  • Emerging Risks and Vulnerabilities: Are We Worrying About the Same Things?
  • Digital Disruption in Capital Markets
  • The Role of Fintech in Providing Financing for the Economy 
  • The Role of Policy Banks in Providing Reliable Financing to the Economy
Also included are reports of the working groups, which considered such questions as "How can we develop the right infrastructure that supports market-based finance?" and "What are the possible scenarios for the evolution of the markets?". Download the report as a PDF

Salzburg Global Seminar is grateful to the following organizations for their generous support of this session: Partners: Ernst & Young, HSBC, JPMorgan Chase & Co. and Oliver Wyman Sponsors: Deutsche Bank Co-sponsors: Cleary Gottlieb, The Cynosure Group, Davis Polk and Dynex Capital Inc. Salzburg Global Seminar would like to thank all the participants for donating their time and expertise to this session and the Advisory Committee for their continued support and guidance.
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Report now online Salzburg Global Forum on Finance in a Changing World: The First Five Years
Report now online Salzburg Global Forum on Finance in a Changing World: The First Five Years
Jessica Franzetti 
The report from the multi-year series Salzburg Global Forum on Finance in a Changing World – The First Five Years – is now available online to read, download and share. After the global financial crisis (GFC) of 2007-2008 that led to many industry-wide changes across international markets, Salzburg Global recognized the need for extended dialogue to address financial strategy and policy shifts in the post-GFC world. With its inaugural session held at the Austrian National Bank in Vienna in 2011, the Salzburg Global Forum on Finance in a Changing World was founded. In 2016, five years since its inception, the most recent session, Financing the Global Economy: How Can Traditional and Non-Traditional Sources be Integrated? – was held at Schloss Leopoldskron during June 2016. Senior bankers, regulators, and policymakers from the USA, Europe, and Asia convened to critically analyze the ever-shifting economic and regulatory environment, compare practical experiences and engage in open dialogue on ethical and media questions. Connecting some of the world’s leading experts in the financial sector and building a network of partners and sponsors, the annual meeting has evolved into one of the premier off-the-record gatherings in the global finance world. Download the report as a PDF.
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Financing the Global Economy - How Can Traditional and Non-Traditional Sources Be Integrated?
Sandra O Connor at the previous Salzburg Global Forum on
Financing the Global Economy - How Can Traditional and Non-Traditional Sources Be Integrated?
Patrick Wilson 
Salzburg Global Seminar begins the sixth annual meeting of Salzburg Global Forum on Finance in a Changing World today. The two-day seminar, Financing the Global Economy: How Can Traditional and Non-Traditional Sources Be Integrated? will run from June 27 to 29. The session comes against the backdrop of the fragile economic recovery and slowing growth in emerging markets in the aftermath of the financial crisis. The focus of policymakers and regulators is shifting from fixing the causes of the last crisis to stimulating growth. To this end, it’s important to look to ways non-traditional sources can be integrated with more traditional sources to stimulate this growth and protect the fragile recovery. Traditional bank intermediation is still important but technological changes seem to enable a shift to market-based, non-traditional financing models worldwide. The session will explore how banks, non-bank intermediaries, and markets all contribute to the sound functioning of the global economy. It will evaluate current approaches to strengthening recovery and examine the shift to market-based financing. It will also examine the increase in electronic trading and use of high speed algorithms. It will identify preconditions for strong and stable capital markets, necessary policies to support their development, and methods of managing associated risks. The Forum brings together policymakers, regulators and supervisors, financial services firms and alternative financial intermediaries, consultants and academics. Bringing together different sectors to discuss issues of global significance in a free and open setting is a cornerstone of Salzburg Global Seminar. Key questions on financing the global economy will be raised including how can capital markets enhance finance for growth, what is the right allocation of roles between bank-based and market-based financing and how can we harness strengths and capabilities of both to serve the economy? Fellows will also discuss what the implications of shifts towards market-based finance are for supervisors and regulators. A special panel is to be convened examining the potential aftermath of last week's "Brexit" referendum in the UK and what will come next in an event that has already had significant impact on the financial sector and the global economy. Since 2011, Salzburg Global Seminar has convened an annual, high-level session focused on critical challenges of financial regulation following the global financial crisis. The Forum on Finance in a Changing World facilitates critical analysis of the changing regulatory environment, comparison of practical experience and understanding of technology-driven transformations.
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The Future of Finance is Challenging - But Not Without Hope
The Future of Finance is Challenging - But Not Without Hope
Louise Hallman 
“The future is fully as challenging as we thought it was – but it is not without hope!” declared Salzburg Global Fellow and program advisor, Patrick Kenadjian at the closure of the fifth annual Salzburg Global Forum on Finance in a Changing World, The Future of Financial Intermediation: Banking, Securities Markets, or Something New?  Kenadjian, senior counsel for session co-sponsor, Davis Polk, and member of the advisory board for the annual Forum, closed the 2015 program with a summary that looked positively to the future.  “After seven years of dealing with the past, it is time to look to the future and see what we can do to shape the financial markets to meet our goals, not just as market participants but as a society, to decide what we want the market to do, and not just what we don’t want it to do,” remarked Kenadjian. “Sorting out our future requires a serious assessment of the fundamental forces shaping it.” Three of the forces highlighted throughout the three-day program included the crisis of public and regulators’ trust in the banking sector, the demographic wave rolling over the world, and the growing challenge of technological change. The program, chaired by Roger Ferguson, president and chief executive officer of TIAA-CREF together with Axel Weber, chairman of UBS, featured expert-led panel discussions, with speakers including Lael Brainard, Governor of the US Federal Reserve; Andreas Dombret, Member of the Executive Board, Deutsche Bundesbank; Douglas Flint, Group Chairman, HSBC Bank Plc; Wim Mijs, Chief Executive, European Banking Federation; Steven Maijoor, Chairman of the European Securities and Markets Authority; Sandra O’Connor, Chief Regulatory Affairs Officer at JPMorgan Chase & Co.; and David Wright, Secretary General, International Organizations of Securities Commissions (IOSCO), examining issues such as the capital markets union in Europe and international regulatory action and market implications; future of financial intermediaries; innovation, technology changes and security issues; and governance and compensation reforms.   In addition to the plenary sessions, the high-level gathering of 50 bankers, policy makers, regulators, supervisors, financial and technology consultants, also formed working groups around topics such as:
  • What can Europe’s capital markets union realistically achieve? And by when? 
  • How do we ensure that adequate liquidity is maintained in capital markets in the view of new international standards?
  • How should financial institutions and authorities respond to the rise of FinTech players and new innovations (crowdfunding, cryptocurrencies, mobile payments, etc.)? and
  • How do changing patterns of financial intermediation impact the policy objectives of financial inclusion and consumer protection?
Recommendations from the working groups – which included improving “financial literacy” in the general public, especially among “vulnerable” populations that might already be beyond formal education; developing targeted measures to move towards universal regulation on insolvency; and increasing co-operation between “FinTech” providers with a focus on information and data security – will be published in full in the session report to be included in the Fall.
The Future of Financial Intermediation: Banking, Securities Markets, or Something New? is part of the multi-year program Salzburg Global Forum on Finance in a Changing World. Read more here: www.salzburgglobal.org/go/552 This year’s program was in partnership with Barclays, Deutsche Bank, Ernst Young, HSBC, JPMorgan Chase & Co, and Oliver Wyman, with co-sponsors Cleary Gottlieb, the Cynosure Group, Davis Polk, and Dynex Capital. 
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Lael Brainard - "There is relatively little evidence of any deterioration in day-to-day liquidity"
Lael Brainard - "There is relatively little evidence of any deterioration in day-to-day liquidity"
Lael Brainard 
The following is a statement from Lael Brainard, governor of the US Federal Reserve, given at the fifth annual Salzburg Global Forum on Finance in a Changing World, The Future of Financial Intermediation: Banking, Securities Markets, or Something New?

Recent Changes in the Resilience of Market Liquidity

Recent events and commentary raise concerns about a possible deterioration in liquidity at times of market stress, particularly in fixed income markets.[1] These concerns are highlighted by several episodes of unusually large intraday price movements that are difficult to ascribe to any particular news event, which suggest a deterioration in the resilience of market liquidity. For example, on the morning of October 15, 2014, 10-year U.S. Treasury yields gyrated wildly, and the intraday movement in Treasury prices was 6 standard deviations above the mean. In addition, after 4 p.m. on March 18 EDT of this year, a meeting day for the Federal Open Market Committee, the U.S. dollar depreciated against the euro by 1.75 percent in less than three minutes, an unusually large drop in such a short interval. A few weeks later, markets experienced some very large intraday movements in the price of German bunds during times of little market news. In contrast, there have been a few notable episodes where market volatility was clearly attributable to significant news but nonetheless appeared to evidence some deterioration in the resilience of liquidity. For example, on January 15 of this year, the announcement by the Swiss National Bank regarding the floor of the exchange rate between the euro and the Swiss franc led to severe disruptions in foreign exchange markets. Separately, the rise in bond yields in May and June 2013, the so-called taper tantrum, also appeared to many observers to have been out of proportion to the news that prompted it.[2]  A reduction in the resilience of liquidity at times of stress could be significant if it acted as an amplification mechanism, impeded price discovery, or interfered with market functioning. For instance, during episodes of financial turmoil, reduced liquidity can lead to outsized liquidity premiums as well as an amplification of adverse shocks on financial markets, leading prices for financial assets to fall more than they otherwise would. The resulting reductions in asset values could then have second-round effects, as highly leveraged holders of financial assets may be forced to liquidate, pushing asset prices down further and threatening the stability of the financial system.[3] Although anecdotes of diminished liquidity abound, statistical evidence is harder to come by. Indeed, there is relatively little evidence of any deterioration in day-to-day liquidity. Traditional measures of liquidity, such as bid-asked spreads, are generally no higher than they were pre-crisis. Turnover, an alternative measure of day-to-day liquidity, is lower, but it is unclear whether this reflects changes in liquidity or perhaps changes in the composition of investors. The share of bonds owned by entities that tend to hold securities until maturity, such as mutual funds and insurance companies, has increased in recent years, which would lead turnover to decline even with no change in market liquidity. In some markets, the number of large trades has declined in frequency, which could signal reduced market depth and liquidity, but could also reflect a shift in market participants' preferences toward smaller trade sizes. Finding a high-fidelity gauge of liquidity resilience is difficult, but there are a few measures that could be indicative, such as the frequency of spikes in bid-asked spreads, the one-month relative to the three-month swaption implied volatility, the volatility of volatility, and the size of the tails of price-change distributions for certain assets. We see some increases in the values of these indicators, which provide some evidence that liquidity may be less resilient than it had been previously. But this evidence is not particularly robust, and, given the limitations of the existing data, it is difficult to know the extent to which liquidity resilience may have declined. As we continue to investigate quantitative evidence of the deterioration in the resilience of liquidity in some of the financial markets, we are also trying to tease out the various drivers of liquidity conditions, such as changes in regulation, trading strategies, and market structure. Regulatory changes are often cited as a contributing factor. Trading financial assets is a balance-sheet-intensive activity, and the Dodd-Frank Act, has created incentives for institutions to carefully assess the risks of such activity through stricter requirements on leverage, liquidity, and proprietary trading, raising the cost of market making and possibly affecting market liquidity. Indeed, there is evidence of reductions in broker-dealer bond inventories in recent years. Nonetheless, since not all broker-dealer inventories are used for market-making activities, the extent to which lower inventories are affecting liquidity is unclear. Moreover, reductions in broker-dealer inventories occurred prior to the passage of the Dodd-Frank Act, suggesting that factors other than regulation may also be contributing. In assessing the role of regulation as a possible contributor to reduced liquidity, it is important to recognize that those regulations were put in place to reduce the concentration of liquidity risk on the balance sheets of the large, highly interconnected institutions that proved to be a major amplifier of financial instability at the height of the crisis. A second possible contributor may be the growing role of electronic execution of trades across equity, Treasury, and foreign exchange markets and the associated increasing role of high-frequency trading. Competition from high-frequency trading in a particular market may reduce the attractiveness of that market for traditional (manual) traders or slower automated traders, leading to a progressive shift in the composition of market participants toward high-frequency traders (HFTs) over time. This shift could be important to the extent that HFTs may have more limited capacity to support liquidity resilience since, on average, HFTs appear to trade with smaller inventories and lower capital than traditional traders. Although having less inventory and capital reduces the cost of trading, it also means that markets increasingly dominated by HFTs may be less able to absorb large shocks. Thus, liquidity may be sufficient and relatively cheap on normal trading days, but it may not be deep enough to prevent large price swings when demand for liquidity is significantly above the norm. This consideration would be most relevant in the markets that are amenable to high-frequency trading, and automated trading more generally, where assets are fairly standardized, such as equities and U.S. Treasury securities, and less relevant in markets where securities are more idiosyncratic, such as corporate bonds. It is also possible that markets that more readily lend themselves to high-speed trading may be characterized by relatively greater concentration over time. Achieving the speed necessary for high-frequency trading requires large technology investments that necessarily may support a relatively more limited number of market participants. Greater concentration in turn might be associated with lower resilience at times of stress. The possible effect of HFTs on the resilience of market liquidity is an important topic for future research. Of course, other developments may be affecting liquidity in financial markets. For example, market participants have indicated that changes in participants' risk-management practices may be contributing to reduced market liquidity. In particular, the experience of the financial crisis may have led many participants to reevaluate the risk of their market-making activities and either reduce their exposure to that risk, become more selective, or charge more for it, thereby reducing liquidity.[4] It is also worth noting the increased role of asset managers on the buy side of the fixed income markets. During normal market conditions, the demand for liquidity from this group of bond holders is likely relatively small, since asset managers acting on behalf of retail investors generally buy bonds to hold them for some period. Moreover, managers of open-end funds hold liquidity buffers that enable them to respond smoothly to normal redemption demands. However, because the large increase in bond fund holdings is relatively recent, little is known about how these funds will react to periods of market stress or to abrupt changes in financial conditions and the adequacy of their liquidity buffers for such situations. Because funds potentially allow daily redemptions even against illiquid assets, it is possible that redemptions could be magnified in stressed conditions as individuals try to redeem early, which in turn could lead to liquidations of relatively less liquid assets, thereby amplifying price volatility and reducing market liquidity. If in fact liquidity resilience has declined recently, it may be a transitional development that will be corrected going forward as participants adjust their risk management practices, and the structure of these markets continues to evolve. For example, if traditional providers of liquidity scale back their activity in response to changes in regulation and market structure, over time, this shift may create incentives for other providers, which are not similarly constrained, to step in. Stress tests, such as those announced by the Securities and Exchange Commission (SEC) offer one way to help ensure that market participants are prepared for sharper spikes in market volatility. For instance, in the Federal Reserve Board's most recent stress test, the severely adverse scenario featured a large decrease in the prices of corporate bonds. We are in the early stages of data-based analysis of possible recent changes in the resilience of market liquidity. An upcoming study of the October 15 event will shine some light on the functioning of the U.S. Treasury market, but there is still much we need to learn. More broadly, at the Board, we will closely monitor and investigate the extent of changes in the resilience of liquidity in important markets, while deepening our understanding of different contributors and how market participants are adapting.
1. These remarks represent my own views, which do not necessarily represent those of the Federal Reserve Board or the Federal Open Market Committee.  2. See Tobias Adrian, Michael Fleming, Jonathan Goldberg, Morgan Lewis, Fabio Natalucci, and Jason Wu (2013), "Dealer Balance Sheet Capacity and Market Liquidity during the 2013 Selloff in Fixed Income Markets," FEDS Notes (Washington: Board of Governors of the Federal Reserve System, October 16).  3. Of course, if the sharp reductions in asset values are fleeting, these second-round effects could be quite limited.  4. Another potentially important change in markets has been the increased prevalence of dark pools or proprietary trading sites housed inside broker-dealers, which provide no information to the public about the volume or prices of trades. It is possible this activity might be changing price discovery, although there is debate over the net effect. 
Lael Brainard was a panelist at the the fifth annual Salzburg Global Forum on Finance in a Changing WorldThe Future of Financial Intermediation: Banking, Securities Markets, or Something New? Read more: www.salzburgglobal.org/go/552 
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UBS Chairman Axel Weber - "The Greek people are convinced that their future in the Euro is a better future"
UBS Chairman Axel Weber - "The Greek people are convinced that their future in the Euro is a better future"
Bloomberg TV 
UBS AG Chairman Axel Weber is "pretty confident that the Greek people are convinced that their future in the euro is a better future," he told Manus Cranny and Francine Lacqua on Bloomberg Television's The Pulse. Weber, who appeared live from the terrace of Schloss Leopoldskron, was in Salzburg for the opening of the fifth annual program of the Salzburg Global Forum on Finance in a Changing World The Future of Financial Intermediation: Banking, Securities Markets, or Something New? WATCH ONLINE: www.bloomberg.com/news/videos/2015-06-30/weber-confident-greeks-are-convinced-of-future-in-euro Weber is co-chairing the session alongside Roger Ferguson, president and chief executive officer of TIAA-CREF and former vice chairman of the U.S. Federal Reserve’s Board of Governors. You can find more on this year's program here: www.salzburgglobal.org/go/552
The Future of Financial Intermediation: Banking, Securities Markets, or Something New? is part of the multi-year program Salzburg Global Forum on Finance in a Changing World. This year’s program is in partnership with Barclays, Deutsche Bank, Ernst Young, HSBC, JPMorgan Chase & Co, and Oliver Wyman, with co-sponsors Cleary Gottlieb, the Cynosure Group, Davis Polk, and Dynex Capital. 
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The Future of Financial Intermediation: Banking, Securities Markets, or Something New?
The Future of Financial Intermediation: Banking, Securities Markets, or Something New?
Salzburg Global Seminar 
Bankers, policy makers, regulators, supervisors, financial and technology consultants will convene in Salzburg this week for the fifth annual program of the Salzburg Global Forum on Finance in a Changing World. The accelerating transformation of the financial services industry, and the emergence of alternative financial intermediaries, have profound medium- and long-term implications for global financial markets and their supervision. Financial intermediaries who channel funds from investors to people and institutions who require capital have expanded far beyond the traditional banking sector in recent years and now exert growing influence on global financial markets. Such entities encompass investment banks, broker-dealers, life insurance companies, mutual and pension funds, mortgage finance, credit card companies, and other types of shadow banks, all of which operate in different ways and at different scales, often with strong regional variations. Alternative channels to traditional market- and bank-financing are now major sources of funds in both developing and developed economies. This increasingly diverse global marketplace for financial intermediation – coupled with ongoing reexamination of the role of traditional intermediaries in the wake of the financial crisis – raises important societal issues. These include the duties financial intermediaries owe to those with whom they transact business; whether banks can meet the rapidly developing needs of their traditional customers; the future of fair and effective markets; the continuing challenge of shadow banking and securitization; and the tension between societal notions of fairness and economic notions of efficiency. From a regulatory and supervisory standpoint, as financial markets struggle to fully recover from the 2008 crisis, the imperative to strengthen the safety and soundness of intermediaries by tightening international and domestic prudential standards (as embodied in Basel III, the Dodd Frank Act and various European Union and other initiatives) may increasingly conflict with the macroeconomic priority to restore growth. As a result, understanding the new dynamics of financial intermediation, and how they influence global markets, will be critical for future resilience, credit flows and the sustainability of the financial services industry. From a technological point of view, new and potentially disruptive innovations, cyber-security risks, privacy concerns about data protection and data theft, and new types of financial crime, present difficult challenges for future regulatory action in an interconnected and borderless financial services marketplace. Assessing the potential impact of these trends on market structure, secondary market trading, and raising funds in the capital markets, as well as the scale of investments required by banks to keep pace with new technologies and the constraints the latter will place on traditional intermediaries, are matters of increasingly strategic concern. Leading voices across the financial services sector are starting to confront the magnitude of these emerging challenges and their potential to radically alter relationships along the transaction chain.  Tackling all these issues, The Future of Financial Intermediation: Banking, Securities Markets, or Something New? will open on Tuesday, June 30 by examining the capital markets union in Europe and international regulatory action and market implications. Further panels over the three day program will cover the future of financial intermediaries; innovation, technology changes and security issues; and governance and compensation reforms. The program also includes in-depth working group discussions and the now-traditional evening debate, the topic of which for this year will be “Resolved that the universal banking model and traditional intermediation are outdated, broken and not worth preserving.” This year’s program will be chaired by Roger Ferguson, president and chief executive officer of TIAA-CREF and former vice chairman of the U.S. Federal Reserve’s Board of Governors together with Axel Weber, chairman of UBS and previously president of the German Bundesbank between 2004 and 2011. Speakers include regular contributors to the annual Forum including Andreas Dombret, Member of the Executive Board, Deutsche Bundesbank; Douglas Flint, Group Chairman, HSBC Bank Plc; Wim Mijs, Chief Executive, European Banking Federation; and Sandra O’Connor, Chief Regulatory Affairs Officer at JPMorgan Chase & Co. Speakers also include Sandra Boss, External Board Member of the Prudential Regulation Authority at the Bank of England, and Ricardo Moreno, Head of Global Engineering at BBVA.
The Future of Financial Intermediation: Banking, Securities Markets, or Something New? is part of the multi-year program Salzburg Global Forum on Finance in a Changing World. This year’s program is in partnership with Barclays, Deutsche Bank, Ernst Young, HSBC, JPMorgan Chase & Co, and Oliver Wyman, with co-sponsors Cleary Gottlieb, the Cynosure Group, Davis Polk, and Dynex Capital. 
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