Innovation for Financial Services Summit – Luxembourg, 19th – 21st September, 2012

The Luxembourg conference, to me was very worthwhile. The sessions mainly focused on innovations in retail banking. There were very small groups in most sessions and this made discussions very interactive and interesting. In terms of networking, I would say there were lots of opportunities. All the participants were open and willing to talk.

The following are key points that I find interesting and important to my research:

  • Financial innovation specifically, over decades, has brought many benefits to society, however some have brought negative outcomes and this is due to the lack of adequate supervision.
  • Findings from a self -assessment research show that
    • Only half of sampled banks have an innovation strategy
    • Only 43% of the banks he evaluated had a clear innovation metrics
    •  More banks are aiming to be innovation followers rather than leaders
    • In terms of performance, banks rate themselves higher in channels and lower in processes.
  • Innovation exists on a sliding scale from radical to incremental
  • Is there a trade-off between regulation and financial innovation? It depends on a lot of factors; however, there are three possibilities where regulation will encourage, discourage or not cause any impact to financial innovation.
  • The ability for regulation to identify innovations that aid bubbles and panics will always be a challenge; and it is not possible to have a right model for regulating financial innovations. Thus regulation should focus mainly on increasing transparency and decreasing regulatory uncertainty in order to maximize benefits and limit negative impacts.
    • Complexity (e.g. CDO, CDO squared, CDO cubed) is not innovation
    • Leverage is not innovation – it is people taking a huge amount of risk
    • Transparency usually helps innovation
    • Basel III as a regulation helps reduce leverage based innovations, but it could lead to more innovations that are not necessarily good.

 

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