FIN-FSA conference: EU financial markets today and in the futureThe COVID-19 pandemic has impacted the economy and financial sector worldwide and also accelerated transformation trends in financial services. The most prominent of these is digitalisation. This is bringing greater efficiency to activities in the sector and spurring innovation, but is also ushering in new kinds of risks. The financial sector has become one of the world's biggest targets for cyber attacks. The need for action to combat climate change has not diminished during the pandemic either. The financial sector must take into account more actively the effects of climate change, not only in relation to its business models but also concerning the risks of its clients.
Under the title ‘EU financial markets now and in the future’, the focus of the FIN-FSA conference on 2 November 2021 is on how the financial sector has survived the unprecedented pandemic crisis and how it can retain its resilience in the future. Key issues will be presented and discussed by an array of distinguished speakers from Finland and abroad.
“The economy has survived the crisis better than expected, as governments and central banks have been able to support the debt sustainability of households and businesses, and supervisory authorities have furthered the financial sector’s ability to serve its clients. The crisis is not over yet though, so it is essential that steps taken towards a new normal are sufficiently cautious,” says FIN-FSA Director General Anneli Tuominen in her opening remarks.
Digitalisation and climate change are transforming the financial sector
Although attention has been focused on surviving the pandemic crisis, trends that were under way earlier have also gathered pace. The digital transformation process has actually been accelerated by the pandemic restrictions.
“Digitalisation has also brought greater risks for the financial sector. International assessment indicates that the financial sector has become one of the world’s biggest targets for cyber attacks, second only to the health sector. This is why it is vital that cyber threats are taken seriously and sufficient readiness is in place to meet such threats. There is still work to do for regulators, supervisors and market participants,” notes Tuominen.
Taking climate change into account in insurance and banking has become an ever more important part of risk management for entities in the sector. In business activities, both the physical and transitional risks brought by climate change must be considered. Banks and insurance companies must look ahead three decades, towards a carbon-neutral society.
As investors’ interest in green products has grown, so too has the risk of greenwashing. In order to mitigate this risk, disclosure requirements have been imposed on market participants. For example, information given to investors is assessed by the FIN-FSA in connection with approval of fund rules. Ensuring the accuracy of information calls for clear specifications and robust expertise in sustainability.
Growing indebtedness and operating environment risks must be considered
Government and household debt has grown during the COVID-19 pandemic. Governments have borrowed in order to get through the crisis, whereas the rise in household debt has been a result of housing investment connected with pandemic-related changes in people’s lives and the low level of interest rates.
“Even before the pandemic, there was a risk of growth dwindling as a consequence of demographics and weak productivity growth. This risk is still present, but now it is encountered with a higher level of debt,” says Tuominen.
Slow growth in the economy, a low birth rate and the associated demographic implications, plus low interest rates and high stock market valuations combine to create a challenging environment for the pensions sector. This is because the achievement of a profit target that supports the system’s sustainability would demand greater risk-taking. Such risk-taking would nevertheless elevate the pension sector’s systemic risk in crisis situations.
International and Finnish experts in economics and finance to speak at conference
The speakers at the conference are: Andrea Enria, Chair of the Supervisory Board of the European Central Bank; Leena Mörttinen, Permanent Under-Secretary at the Ministry of Finance and Vice Chairman of the FIN-FSA Board; Gabriel Bernardino, former Chairman of the European Insurance and Occupational Pensions Authority (EIOPA); Torbjörn Magnusson, Group CEO and President of Sampo Group; and John Berrigan, Director-General in DG FISMA (Directorate-General for Financial Stability, Financial Services and Capital Markets Union) of the European Commission. The panel discussing investment will be chaired by Niina Bergring from the FIN-FSA, and her fellow panellists are: Sari Lounasmeri, President and CEO of the Foundation for Share Promotion; Erika Tikka, Head of External Fixed Income team at Keva; and Steffen Kern, Chief Economist and Head of Risk Analysis and Economics at the European Securities and Markets Authority (ESMA). The presentations and a recording of the webcast will be posted on the conference web page.