Banking amid Uncertainties

[Music] [Music] ladies and gentlemen good afternoon thank you all for being with us and Welcome to our panel on banking amid uncertainties after weathering a banking crisis last year which nearly became a historical moment when Americans and others lost faith in their Banks 2024 presents its own set of challenges this year banks are navigating increased geopolitical tensions the possibility of a reversal in an aggressive monetary policy and the record number of Voters heading to the polls half of the world's population is participating in elections this year elections that could be pivotal for political alliances and global trade given this macroeconomic and political climate what are the top concerns of the banking Executives how can they prepare for such uncertainties and where do they foresee the industry heading in the future to the discuss this and more please join me in welcoming our panelists we have Mr Haim Bim Co CEO in vescor Bahrain an Richards Vice chair Fidelity International Claire Woodman head of EMA CEO of Morgan Stanley and Co International and Marcus valenberg chairman of sebb Bank in Sweden thank you all for joining us Claire let me start with you I have mentioned some of the risks that can affect the bank in sector uh this year but obviously there are other risks to consider so what worries you the most in terms of affecting your business in 2024 and Beyond so um thank you um really important question to start with and actually timely for us at Morgan Stanley because um one that's addressed in a piece of research we published this morning Andrew sheets and and and I were discussing that earlier this morning and um you're right to call out those topics geopolitics um Central Bank policy uh fiscal Outlook inflation and certainly you know any newspaper article you read discussions in fora like this um these are certainly being perceived and uh seen as the key drivers of what lies ahead and uh certainly it's correct to say that a lot of asset markets are certain certainly following expectations on oil prices the future path of an expectation on interest rates um however there are interesting data points around individual asset classes and how they may and are responding in terms of looking at the credit spreads um but um I would say that um um Banks always have to have sustainable business models they have to be able to adapt to change to know what to um adapt to um in terms of foreseeable risks and unforeseeable risks risks and I think post crisis and I'm sure we will get into this discussion um with more Capital with more liquidity highly experienced management teams deploying tools like stress testing scenario planning Horizon scanning um I do think that Banks and Bank management teams are well equipped to um to deal with what's what lies ahead and what may be defining factors but one thing is absolutely certain the industry will change it's evolved considerably and we talk talking about that a few minutes ago over the past 15 years which in many ways has set the scene for what we are dealing with and will be dealing with for the years to come we'll go back to some of the points that uh you mentioned but I want to hear from Haim what worries him the most because you are operating in a region close to the uh geopolitical conflict yeah Solara I should say that um um I feel better today than I did in 2008 I think many of you would remember the 2008 period where we didn't know if our money was safe in the bank in the bank any bank it doesn't matter so the reality is uh look at all the shocks we have gone through in the last four years covid we didn't know if our loved ones are going to be alive or not um interest rates we didn't know if we're going to be able to afford our mortgage payments or not and then you have some very blue chip names like Silicon Valley Bank and others are under but I I think it's fair to say that most likely none of us similar to how many of us have done in 2008 rushed to the bank to withdraw some cash leave it home in case you can't access your bank account so whatever system um was put in place whether it's a Regulators or self-regulated by the Banks themselves it worked and I think it's fair to say that there is a significantly higher level of trust in the banking system today than it was 15 years ago and as we all know trust is the number one most important asset any bank has before the balance sheet so so to to answer before answer question after the banking crisis of 2023 and the bank runs correct but trust is still much much better today than it was any time uh 15 years ago so I think in that respect I'm not worried about uh the U uh the Integrity of the banking system uh now I am excited by the um uh what um generative Ai and other efficiency tools can bring to the banking sector I still scratch my head why does it take 48 hours for a wire transfer to go through what happens to that money is someone literally picks it up and goes to the other bank and deposit it to my account why do I need 48 Hours okay for the banking so I think there's there's a lot of efficiency in the system efficiencies in the system that come through the GCC itself have uh been quite shrewd in opening the doors um both from a regulatory from uh creative thinking from um the arrival of innovative financial and banking uh tools to evolve and if I have a crystal ball in 15 years time I would suspect that perhaps the center of influence globally in the banking world will include not only places like New York London Hong Kong or Singapore but most likely this part of the world as well well um an do you share these thoughts that the banking crisis of 2023 is over or is the risk or are the risks are still there so I think I think if there are any Regulators in the room they would have been excuse me absolutely delighted to hear a supportive comment from the financial sector um but I think it's very fair I think 2023 was quite a test of the supervisory system and it was a test that happened because of supervisory failure if you look at Silicon Valley Bank in particular they didn't have a a credit default scenario which is often what triggers a a a credit crunch um a default plus Leverage is the usual combination combined with a liquidity mismatch it was pure and simple it was a mark to Market issue what took people by surprise on the back of that supervisory um um oversight let's call it that or lack of oversight was the speed with which deposits then moved because of digital banking so there were a couple of big surprises to what had been anticipated and yet the system coped so I think that's uh really quite an important marker that's laid down there I think the bit that we don't know about is that the direct consequence of the changes the regulatory the super changes that were put in place post 2008 is how much of the risk Capital effectively moved out of the banking sector into the nonbank financial institutions much of which is much less supervised or not supervised at all and some of the statistics on that are quite staggering inance in the US but the bank share of mortgages has gone down from more than 75% to under 50% uh leverage loans 50% down to 25% even in the cash Equity Market because of uh Market making highfrequency Traders now have 50% of the market there the bank element of that has gone down from over 90% down to %. so a direct regulatory a consequence of those regulatory actions post financial crisis has to be has been to create a completely new part of the financial system at scale that has not yet been tested in a crisis now I think there are strong argument to say that that is less systemically important that it is less owned by small individual depositors of the kind that the regulatory system is designed to protect so we think that it is probably less system less susceptible to a systematic um problem but the truth is we don't yet know because it's not yet been tested but I think as said I think the broad brushes the system has so far responded quite well in the face of some unexpected challenges to the financial system thank you let's move to the issue of the interest rate risk because we know it directly affects the bank's Prof profitability and I know that European Banks suffered for so many years of low interest rates and then we have seen a better performance due to the increase in interest rates uh my question to you is that we're preparing now to uh for interest rates to go back to drop whether it's in Sweden or in the Euro Zone what does this mean to your profitability so for the banks of course it will be uh a direct so to speak effect impact on the profit and loss accounts I mean we've had a really good couple of U years in terms of the interest rates in increase and that might subside again but I I think that the interest rate risk we shouldn't forget that what happened with the Silicon Valley Bank and perhaps also credit Swiss which really were indicators were directly an a result of interest rates movements so definitely that is a big question I I I think that uh we should not expect any Central Bank to uh stop fighting inflation have they come this far they will not give up uh and that I think is where the jury is still out if we will have that impact uh or not coming in so from my point of view uh I think there are a number of inflationary movements in the global economy that is still there uh with lot of uh Investments and so on coming through uh and therefore I'm not so 100% sure that we will have this drop that everybody's wishing for right now for the economic impact at the same time I think from my point of view yes markets certain asset classes have still performed well with the high interest rates which have perhaps to a certain extent been a surprise but if you look at the corporate customers which is really driving at the end of the day we we tend to look at the markets very very much but you also have to think about the real economy and the cost of capital has gone up and among all these uncertainties that we are dealing with in the business world right now the interest rate risk of having more costly projects to finance with these higher interest rates definitely in my view looking at our customers definitely impacts the way they think about doing it at this point in time we need more Investments more real Investments uh than less so yes I don't think we should underestimate the interest rate risk I mean it's really what moves the markets and what moves the actions of of corporates but at the same time don't expect any Central Bank to move too early on it they will make sure inflation is kept under control first I want to hear your thoughts CLA on that issue what are you factoring in are you factoring in a a decrease in interest rates are you factoring in a sticky inflation that might reverse the course of interest rates and maybe uh the Federal Reserves for instance coming back and increasing interest rates this year instead of decreasing interest rates one thing one thing is right is that um expectations in the market have rapidly changed from I think it was broadly around you know in the US up to um even maybe seven interest rate cuts to um probably around two um I um I think um we um we we shouldn't underestimate the importance of um going the final mile um on um inflation which is um absolutely the critical priority for central banks in fact it's part of the main stay of their mandate um but just going back to Marcus's points I do think it goes back to the the fundamental sort of business 101 principle of the importance of having a diversified business model and applies as much to Banks as it does to any corporate and really understanding um you the multiplicity of your businesses and the factors that drive those businesses and profitability um and um and I think an overdependence on a system has on one particular form of financing can be problematic so um you know in the um in the European space in the Euro Zone there's a high dependence on Bank lending um and the um investment in capital markets and having Diversified forms of investors coming to support much needed investment and capital projects is key and I raised this in particular because I know that the evolution and development of debt Capital markets here in the kingdom is a huge priority and um an important one thank you ham I would like to come back to something that you mentioned earlier that you are much uh there is much more trust in Banks compared to uh 2008 and we know that following the 2008 financial crisis Regulators has Set uh has introduced so many rules and so many regulations for the banking sector that many believe is inconsistent many Bank Executives believe is inconsistent and very costly to the banking sector and it's not a fair it doesn't give us a fair uh place ground with the uh non-banks in the financial sector what are your thoughts on that so so I think you know as an end consumer either individual or a business um the net effect has been positive what do I mean by that um 15 years ago or 20 years ago if you want to have a bank account if you want to get a mortgage if you want to get a corporate loan you go to your big Banks okay and that's pretty much I'm guessing 80% of the business or so uh today the there's multiple options literally multiple options and uh uh even down probably in your own everyday life you know you can get your mortgage from your big Banks but also there's so many uh other institutions who can give you all kind of like financing uh options so as an end as an end user of the financial ecosystem individuals and B and corporates alike the whatever The Regulators have done in the 2008 have created the net the side effect was the creation of a very vibrant non-banking financial industry now sooner or later that's going to have to be regulated in some shape or form and it's okay all Industries and sectors they evolve in a chaotic Manner and then over time there's some kind of a a discipline that gets put in place either by the market itself or uh by The Regulators and what have you so that's okay it's a natural evolution of sectors however as a world economy the world is a much more vibrant access to Capital is much more available not just to those who can both corporates and Nations but also others who can't historically can't than any time in the past so in that effect it is a net positive I like to thing now obviously there's always thieving issues there's always the um you know kind of uh some perhaps it's I suspect the three the three banks on this on this panel ourselves not included uh will feel it's an unfair advantage but you know what if it's unfair that's right set up a separate set set up set up your own uh non-banking subsidiary you know kind of outside the regulatory framework that exists today and compete and that is the beauty of the market today it is significantly more competitive than any time in the past and as an end user we are better off because of that I want to hear your thoughts uh on on this matter before moving to the banks so there there's a couple of thoughts um the first is that all of the banks and I assume of my my esteemed colleagues would agree with this um are doing very well about selling services including origination and other services to the non-bank sector so I think there is a symbiosis in the ecosystem perhaps that isn't isn't totally acknowledged but I think broadly um I think that's absolutely right and I think as part of that Natural Evolution what you are tending to see is either the banks are for example in the digital world setting up their own digital subsidiaries and competing it with with the fex for example in that space or they are buying they are buying lots of um lots of the the the startup the innovators in the ecosystem and again I think that's a a Natural Evolution that you economically would expect to see so I think I would totally concur with the comments it's part of a healthy ecosystem there is one thing if I just might Lara just to come back to on the previous question that you had on the level of interest rates and interest rate policies I think a conundrum that exists out there right now that central banks aren't totally comfortable talking about in public but I think in the worry world in the dark midst of the night that they have and the dark recesses of their mind it's this if you go back to the 1950s the so-called advanced economies had average government debt to GDP levels of about 110% today it's 270% levels of government debt globally look increasingly in Uncharted Territory I don't want to say they're unsustainable but they're certainly in Uncharted Territory and the conundrum for central banks is this the way that you diminish that problem is you allow inflation to run hotter for longer that is not in most central banks mandates and I think the conversation that needs to start at a certain moment is what is the right level of sustainable inflation given the level of government debt and I don't think that conversation is happening to the extent that it needs to now and I don't think we have the answer to it now although perhaps again the bankers amongst us may disagree yeah we don't have that voice on this panel but um how Marcus let me go back to the issue of U regulations and um we know because Banks they were very much regulated following the 20 eight financial crisis and they were less eager to lend this is when financial institutions stepped in and this is when the uh sector or the market of private debt increased tremendously in the past few years and now Regulators are worried about this sector uh and the systematic risk that brings to the financial uh sector as a whole I want to hear your thoughts on that well uh being a banker you know where I'm going to come out but the I it's it's uh true that in 2008 we needed more regulation so I mean I think that that's beyond the point I think also it's fair to say that uh the situation is better today than it was and that people can feel but you're looking upon it from a bank point of view I think the most difficult thing to navigate is actually the continuous flow of new regulation coming the whole time which I think everybody work living in the banking world knows that you you're spending so much time on trying to find which is driving cost which also drives the cost of credit or cost of funds in the banking system as such and that's what makes it difficult to comp compete with the uh nonregulated funds I asked uh a central Banker a number of years ago how long are you going to continue increasing the regulation and he said well it's going to continue until we have the next big Financial crisis and if you make that without going Belly Up you I mean the banking system then we're going to stop regulating if that is true or not I don't know but what I'm trying to say is that the uh allocation of risk in the system as it is today is not really known until something really really bad happens I mean 2023 was a difficult year but still it's not at the level of 20 eight so it's not really a a substantial hit in my view at least on the system even though we had some very big failures uh but but this is this is only part of what the bank has to consider today so when I uh I mean I've been at with the bank uh as the chair for for for a number of years and you can see the big shift in Risk uh assessment of a bank today than 50 20 years ago when we were principally looking at credit Market liquidity risk but today you have regulatory as a very major risk for all banks that will not comply you have cyber you have geopolitical you have climate and and and and so when you in the bank position today which I think speaks for uh a number of the of of the of the considerations both from regul and from Banks is that the number of risks that you now have to consider from a bank point of view has uh increased in a very very substantial part and I think that is recognized by regulators and that's also a reason why they regulating the banking industry in a different way and different way of thinking than earlier at the end of the day responsibility rests with the management and board an um Claire sorry how worried are you about the risks that the private debt presents to the banks themselves through their exposure to the financial institutions that are giving this uh private debt yeah it's a good question because um um as we've seen um the structure of the market and the industry has changed considerably and I would say that is part of um a result of the um approach to credential regulation which largely um encouraged the move of a number of um you know traditional and Bank like activities outside of the regulated sector um due to largely um capital and liquidity requirements imposed on the banks um but I would say that whil St the private markets and private Credit in particular have grown considerably and are a core part of of the market to provide funding and financing um the public markets particularly include um public and government debt remain by far the largest and growing at the fastest rate um do do does it concern me I go back to um what Marcus said um Banks um are run by management teams and overseen by Boards and Regulators um we're expected to be able to understand and assess not just our current risks and current exposure but the forward-looking risk and how those might exposures might change transmute um and and um we all have um risk management Frameworks limit Frameworks and approaches to understand the evolving nature of those risks so I went back to talking about the importance of stress testing which is an incredibly important management tool not just for strategic and business planning but also for really risk assessing and you know essentially future proofing your businesses um but um scenario testing scenario planning and of course Horizon scanning so it's very good that I think tomorrow on the agenda there is a session on looking ahead and forecasting and understanding what's there because I don't think we have quite the technology to really predict but we certainly have better tools to understand the range of outcomes and what the range of outcomes could be for um your own portfolio of risks thank you I I would like to mention that I would open the floor for questions so please prepare them raise your hand and I will give you uh the opportunity to ask the question um so and uh another thing that CEOs of banks are worried about and is the regulations related to climate Finance uh it's getting a huge backlash from executive from the banking sector when banks are being asked to align their Investments and to align their loans with ESG goals it's it's proving to be very costly um what are your thoughts on that it's a very interesting question and I think um it has risen up the agenda over the last year 18 months from what was a reasonable consensus if you went back two to three years because it has become such a politicized topic particularly not exclusively in the US but particularly in the US and I think in the plenary this morning there was quite an interesting comment that was made about actually policy being kind of delegated to the corporate sector to be done um whether that's in climate You could argue it it's in anti-money laundering there you know social you know there are quite a lot of areas now where there's a kind of Delegation but then because of the politicization it means that corporates end up being pulled in a number of different directions so the the overarching thing is I don't think there are many um finan cial Services Executives so it's broader than just banks that don't understand there are very real Financial consequences if we don't find a way of financing the climate transition and uh addressing the risks associated with it I mean if you're an insurance company now you're already living that because you're seeing it coming through in your claims so it's already there and out there the question is what is the best tool for corporate to work with in order to be able to help affect the the transition that I think the vast majority would agree is necessary to be done and unfortunately that's very difficult for corporates themselves to answer we do need the political system to agree what are the compromises and what are the what are the common denominators of what needs to be done um we are seeing that fragmentation you're seeing different countries different regions taking a different approach to it that may well get us to where we need to go because sometimes a little uh a little bit of uh competition in uh regulatory Frameworks can actually push things into into the right direction but it is a bit of a it is it is a problem right now that is very real for executives when they got get caught in between um different competing political agenda in that ultimately the transition needs to be financed the finance institutions will play a part in that but they need some more clarity frankly and more consistency from government from policy makers to allow them to do that on a Level Playing Field and it's not there yet let's hear the thoughts of Marcus on this issue is the backlash only in the United States or in Europe it's it's not in public but there's still backlash I I I come from a part of the world where this the the the pendulum is completely in the other direction it's very hard to sell an asset management product which is not EST related in my part of the world uh today it's very hard to get a Consortium of banks to finance North Sea oil for example so it's it's we're we're complet in a different part but I I believe that one of the challenging points here is exactly to an's point that how how how you going to look upon this going forward and and one of the big questions that we are dealing with uh right now is the need for a regulatory approach that will be more even around the world because we have a EU regulation which is going in one with the taxonomy going one way but we have to adopt that into a comprehensive comparison in other parts of the world uh IFRS or whatever so that that is one of the questions that I think regulatory bodies are are re really looking at but looking at from a business point of view we see this green transition as a great opportunity for the bank because we've taken the view uh in our bank that our job is not to terminate the relationship with long-term customers our job is to help them Finance the transition into a cleaner economy and a cleaner business and that is something that I think most corporates in our part of the world it resonates with them extremely well because I think uh many corporates I would say the majority of corporates that I know uh have basically taken to heart that this is the right thing to do it will give us opportunities actually in some of the most larger uh industrial projects going on in Scandinavia today or in the nordics basically the big Industrial have come to the conclusion that their customers for example those buying cars will actually be prepared to pay say 5 to 10% extra for their car as long as they know that it's a more sustainable produced and sustainable uh propulsed car and I I think this has really turned uh the corner in our part of the world in terms of actually uh pushing that much harder so what is the failing link so I I think one big part is that we're now in the territory of finding how to share risk governments uh in the UN the government of the United States have found a way to do that they produced the IRA which is one way of sharing the risk by basically giving a support for it uh Europe is trying to get there we're very good at regulating we're not so good at finding the incentives to make it happen but in my view if we're going to get this going uh considering that so many governments are highly in debted today they will need much more private Capital to make this happen so this is one of the big things that we're dealing with from a bank point of view given given the trillions of dollars need it uh to fund these absolutely the projects that lead us it's huge amount briefly are you interested in this uh sector and investing in this sector um yeah of course of course it's a uh I think the starting point needs to be it is a collective responsibility it's a collective responsibility right whether we like it or not it's uh it's an investment in the future can we make more money by perhaps ignoring the ESG criteria of course we can we can also make a lot of money in the cocaine trade okay so it's that's not really the question mark whether um we should be embracing these principles the fact is uh the gpce by the way the governance that's pretty much set today we really talking about more the the the climate uh the climate aspect of it it is a collective responsibility some operate or behave or have different nuances to it than others and it's okay you know not all of us are you know vegan or not all of us perhaps have same but that's okay we'll all have our own uh path but as long as the principle is correct that's fine at inves cope itself indeed we do have quite an active uh climate solution uh investment um for it will take time to catch momentum but it's okay as long as there is a a starting point but let me know I want to touch on one point on the uh on the risks which haven't been mentioned which is big in my mind um if you to ask me what's the biggest risk I see in our business in the Alternatives um the average age of the invest Corp investment professional private equ real estate is 34 what does that mean 34 that means most of these guys have joined the workforce about 2010 2010 okay they have never lived through the 2008 financial crisis they have never lived through the 2000.com crisis they have seen groovy times for the last 10 years okay so how do and many of those if you are in in the alternative space and if 14 15 years youve done well you will find yourself in investment committees and what have you so you are in decision-making role so one of the bigger risks I see going forward is many of the new the executives who have come into the field investment or banking fields in the last 15 years years haven't really seen tough times very difficult times where you're day in and day out doing nothing more than Covenant reset and kind of working through liquidity issues and working capital issues and that's literally your life for years uh how does this Young Generation adapt to an environment which is not as groovy as it was in the last 15 years to me is one of the biggest risk at least I see in our business for years to come amazing um I would like to open the floor now for some questions please sure Alex Javan and silic Medicine uh we are a global AI powered drug Discovery company so we use generative AI to Des design new molecules with specific properties took a few inter human clinical trials and decided to go into a new field for us carbon capture so it turns out that the same algorithms can be used for uh new materials for carbon capture and what I realized is that it's a super um polarized world now right so actually some of the best work is done in China and if you touch China very often you cannot touch uh the US academics for example they come to you and say well we cannot collaborate with you on an open source project so it looks like geopolitics are becoming huge issue right now how do you see it in your business where do you invest uh in which geography China us um uh and uh Middle East which turns out to the be in the Middle Earth now are you addressing your question to sub all of you right so how do you see geopolitics playing and uh also um what do you think about the future of the US dollar that's another question I wow that's this is another thing to add so two questions geopolitics and US dollar who would like to answer that maybe I can yeah yeah I can start on the investing front um um as a global investor like we are it's very difficult to ignore China the same way it's very difficult to ignore North America I think every single one of us here have made money in some shape or form in the US it's an incredible market and will continue to be our biggest market for at least my professional lifetime no question about it having said that um uh China does continue to offer a certain certain macro attributes that are just mind-blowing literally the only word I can use is mind-blowing I was there to I I am there quite frequently and uh some of the Innovation the uh but forget about kind of technology and what have you just start from the foundation um educational system the universities the absolute hunger and commitment of those young Chinese to just Excel and to me you've got the education you've got that kind of hunger to make it happen and obviously hopefully the ecosystem you can make Miracles okay and that's effectively the American dream right so in a way it's um it is at least from our perspective it's a bit unfortunate um the geopolitical tensions um you try as a global investor to keep away from it and not touch on perhaps sensitive sectors but for all intensive purposes I think we we will continue to be as active in North America as we are in China and many other parts of the world and in regards to the supremacy of the US dollar an would you like to answer that is is the supremacy is there a threat to the supremacy of the US dollar especially when China now and other countries they have a bigger portion of their reserves and currencies other than the US dollar look I I I think you know the dollar question is is first and foremost a question about do you think that the US economy is continue is going to continue to be a strong and healthy econ economy so take I would take the geopolitics out of it and I would ask on the basis of what is going on in the US economy and as as we've already heard and as we've already seen the US economy despite certain challenges despite certain imbalances that are out there it is still an extraordinarily powerful economy and that doesn't mean that it won't that the US dollar won't have its periods of weakness and the interest rate differentials and all sorts of other things will affect it but I think while the US economy Remains the economic Powerhouse that it is uh I think you will see the US dollar continuing to carry immense weight on the global stage thank you you would like to take another question yes please Jo theup the University of Amsterdam I've been working on climate change for the last 35 years and uh we need to make 1.5 we can't afford to miss it I don't see the urgency in the way the banks are responding and and in fact they were pretty much missing from the whole discussion for I think the first 20 years and now you see some more activity coming in so I'm curious to hear how you see this because I do see court cases looming up against the banks I see Western Banks uh lending money to developing country banks that then lend for fossil fuels so there are all kinds of loopholes in the process of how uh resources are being spent and uh you mentioned um electric cars and electric cars are very very attractive but electric cars can't be the future for everybody because of the problems with respect to the batteries with respect to the metals needed and the circular economy will just not be able to cope with that so I'm trying to figure out how do the banking sector see the damages ahead uh in terms of court cases but also in terms of just simply taking responsibility and is there a future for the banking sector if economies worldwide collapse because of the Tipping points in the climate Arena Marcus would you like to answer oh thank you uh so uh uh your position is of course well taken because uh I think if it's one thing we as humans have really hard time really understanding is where we are on the scale if there is a Tipping Point or not a Tipping Point or whatever and the the unfortunate thing we don't know until it happens so it's it's a difficult point of view um I I I'm coming back to the to the to the fact that this is to a large extent um a view on what people have the capacity to do uh within financing technology and their current business that they have on uh there there's definitely an argument that you are putting forward is that for banks this question might be a very difficult point from a stranded asset point of view uh and that is something we all have to deal with and a very a very big reason why Banks need to do it I mean we have to and we have in our case classified our whole balance sheet and we know exactly you know exactly where where I shouldn't say exactly but we know quite well uh how the what what is needed to be done but you cannot look away from the fact that you have uh 100 years plus or of a very long period of time where you built an energy system that now has to be replaced or you have built a structure of corporates that now has to be uh placed so most corporates know what they're going to do in scope one scope two how do they deal with scope three I mean some of the industries have been more effective like the pharmaceutical Industries they have gone in together to make a coalition to push more pressure on the scope three but that will not happen in all Industries which means that if you cannot make a major shift in the whole your whole supply chain it will be difficult to address the questions that you are after but on top of that we're getting two more things that will impact Banking and that is that we will now be also measured on biodiversity in water which is right but makes it the the whole situation even more complicated and if you have looked into the corporate annual reports where we're now trying to do the csrd accounting one year too early just as as trying to meet the requirements in Europe next year you see the the the very difficult and very technical aspects of this work so you have to come to a conclusion on what will really Drive change and that's why I'm back into the question of risk sharing because I personally don't think this change over will come fast enough uh that if we don't get more proactive discussion between government or semi-government uh institutions and the banking sector to finance it because just let me take an example so you have a huge amount of Coal Energy plants in Asia some of them have lead you know lifetime spans which still gives them an economic life of 30 40 years who's going to pay that to make that happen it's a huge uh question and a very long transition period and these are the questions in my mind that are really on the ground which has to be solved in one way or another if we're going to make this change in a real way so thank you Marcus on that unfortunately our time is up on that note we have to end these discussions ladies and Gentlemen please join me in thanking our panelists [Applause] [Music] [Music] [Applause] [Music]

Channel: World Economic Forum

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Id: LQa6OpXzRIE

Length: 52min 50sec (3170 seconds)

Published: Mon Apr 29 2024