Editor of Financial World, Ouida Taaffe gives a round-up of the main themes at the Global Capital Markets conference held at Chatham House, London on 23 March 2017.
Note: Under Chatham House rules, remarks my not be attributed to individual speakers.
A number of speakers mentioned that the financial markets were still covered by the “protective blanket” of expansionary monetary policy at the same time as they were showing “reasonably strong” growth around the world. The dilemma that comes from that, they argued, was how best to unwind quantitative easing without triggering volatility. They suggested that it might not be easy… The main problem is that if central banks suddenly begin to release sovereign bonds back into the market, their yields could rise sharply. One speaker suggested that “only one central bank has to get it wrong to create a lot of volatility”.
However, the speakers also stressed that central banks have “a very difficult balancing act” given the political landscape and that “if there is one positive aspect of the global response to the financial crisis it is central banks”.
Brexit may not be hard to do
Several members of a panel on Brexit and the global capital markets were optimistic about the outlook – with a few caveats. “It is a huge opportunity,” said one, “assuming that politics won’t derail talks”.
Though central bankers in the Eurozone have stressed that brass plate operations will not be welcome – there has to be something “substantive” – there was an expectation that the EU will want to strike a deal with London. “Nobody wants to destroy jobs”. However, it was also pointed out that the UK cannot rely on any of the existing deals.
Most agreed that financial services firms are not as footloose as they are sometimes presented. The reasons for the relative resilience of a financial centre are, it was argued, cultural, political, geographical and historical – it “takes decades to evolve a very large and complex [financial services] ecosystem”. Financial centres are also, the speakers stressed, a function of the individual professionals involved, many of whom do not want to uproot their families to move to another country or city. “Regulatory arbitrage is not as great as [people] suspect,” said one speaker.