3rd Annual Symposium on EU-Asia Relations in Financial Services Symposium

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Author(s): 
Cosmina Amariei

Following the success of two previous editions in Singapore (2014) and Hong Kong (2015), the 2016 Symposium on EU-Asia Relations in Financial Services took place in Beijing on 26-27 May. The implementation of Basel III requirements is impacting banks’ trading book, but the full extent of it is still unclear. A more proportionate approach could be considered. The over-reliance on the banking sector remains a threat to financial stability. The development of local currency bond markets in both Europe and Asia is key to diversify the financial system, but significant barriers remain for the development of a sound legal and market infrastructure, especially in Asia.

Meanwhile, shadow banking has developed differently across jurisdictions, e.g. market-based finance in the US and Europe compared to bank-like financial intermediation in Asia. In China, this form of unregulated banking service is gradually approaching the size of traditional banking services. The shift towards more inter-institutional shadow banking activities could give rise to potential systemic risks. But volatility in the Asia’s stock markets suggest that more defaults are still to come, especially in China, where the capital to output ratio is at historical peak. Less discretionary actions by local governments and greater diversification of the investor base for local financial markets in main emerging economies can increase the soundness of the Asian financial system and the economy overall.

Moreover, companies’ financial technologies (FinTech) are increasingly put to multiple applications, e.g. instant payments, digital currencies and monetary policies, artificial intelligence and advisory services, blockchain and securities settlement and even regulatory compliance. These new tools redefine the financial industry, but the full extent of such developments are still to be fully understood. Asia leads these developments, especially in retail financial services. The neutrality of technology for regulation has led to a ‘wait and see’ approach by the regulators, which aims to balance the need for innovation with risk mitigation actions.