OeNB-SUERF conference explores the financial system of the future

44th OeNB Economics Conference in cooperation with SUERF, May 29–30, 2017

This year’s Economics Conference of the Oesterreichische Nationalbank (OeNB) brings together high-level representatives from the world of academia, finance and politics to discuss how today’s challenges are affecting the finance sector and what the future of our financial system may look like. The conference is being held in cooperation with SUERF – The European Money and Finance Forum.

Almost a decade after the global financial crisis, banks worldwide are still recuperating from the shock and getting used to the idea that the future may hold lower earnings. The reform of the regulatory framework governing the banking sector has made significant progress, but is yet to be completed. At the same time, the increasing level of digitalization is creating new challenges for the finance industry and financial regulation: The share of bank customers who no longer conduct banking transactions directly at a branch office but rather via mobile or other digital devices is bound to increase. Not only the way in which financial services are provided may change, but also the nature of the services themselves, as well as the providers of these services.

However, as OeNB Governor Ewald Nowotny cautioned, a central bank’s action must not be guided by technical trends that might later be revealed as short-lived fads. “One of the key tasks central banks have is to ensure stability,” he said in his opening remarks. This task requires a longer-term orientation which must observe factors like economic growth, population trends and productivity in order to explain the demands on the financial system of the future. These are the main drivers that will shape the financial system of the future.

Nowotny stated that he did not buy into pessimistic visions predicting a long phase of stagnation. It is clear, however, that we cannot expect a return to the high growth rates recorded in the post-war period, he went on to explain. In today’s world it is essential to remain part of global value chains to safeguard economic welfare. Moreover, economic policy needs to ensure an appropriate distribution of the benefits generated by growth, not least to secure the political acceptance of the economic order. Otherwise, the notion that globalization is nothing but a zero-sum game benefiting some at the cost of others may continue to spread – a dangerous misconception according to Nowotny. The EU and Austria in particular still belong to the regions with the highest per capita income worldwide.

Over the coming years, however, Governor Nowotny expects employment figures in the banking sector to decrease in the wake of industry-wide restructuring trends. Also, banks’ importance in financing the corporate sector will decline throughout Europe, giving way to other market-based financing forms.