Guten Morgen and welcome to FIA’s Frankfurt Forum.
This city is the perfect gathering place for our industry, given its unique position in global finance. To begin with, Frankfurt is one of the more international cities in Europe with one-quarter of its residents coming from outside Germany. It is the largest financial center in continental Europe with several important FIA members located here, including Deutsche Boerse, Deutsche Bank and Commerzbank.
Frankfurt is also home to several influential government authorities near and dear to our industry, such as Bafin, Bundesbank, and the European Central Bank. If our industry wants to get business done in Europe, Frankfurt is a good place to start.
Today, we gather to discuss the various market and regulatory challenges facing the European cleared derivatives industry, and how we can partner with policymakers to ensure continued access to these important markets.
FIA devotes significant resources to making sure our industry—especially our EU members—have proper representation in Europe and beyond. Last year FIA opened our Brussels office, led by the tireless Corinna Schempp, where we regularly engage with policymakers regarding our markets.
In fact, last year a majority of FIA regulatory letters and engagements were in response to European consultations. This year, FIA named its new Head of Europe, with ex-Deutsche Banker Bruce Savage coming on-board in August.
Be assured—FIA stands ready to be your voice for the global cleared derivatives industry in Europe.
As we gather today, there is uncertainty all around us. I think it is fair to say that we are experiencing the highest level of political skepticism in the last 50 years.
Whether it’s the widening political divide in Europe due to the looming Brexit decision or the heightened partisan tensions in the US, there appears to be an anti-establishment ground-swell among voters around the world.
Every day our newspapers are filled with stories of political unrest and the unraveling of post-war multinationalism. Breaking news: FIA cannot fix these problems. Like you, we closely monitor these political events globally with great interest and sometimes anxiety.
How will these events affect our families? How will it impact our children? Where is this all heading? Truthfully none of us know. But it is exactly at these uncertain times that FIA can play a pivotal role for our industry by clarifying regulatory uncertainty and being a steady voice for our markets.
We do not wait for events to unfold. We proactively work with regulators, sometimes daily, to help our member companies anticipate and adjust to this ever-changing world. Brexit is a timely case in point. FIA has been a constant drumbeat of reason with the U.K. and E.U. regulatory bodies to ensure an orderly transition for these important risk markets.
While all of us may have various views on the Brexit decision itself, we can all agree that the hardworking people of this industry—given the proper time and transition guidance—can overcome just about any market-related change, including the regulatory complications surrounding Brexit. If you disagree, you probably slept through the past decade of post-crisis reforms.
The good news is the U.K. and E.U. authorities have worked responsibly to lessen the impact of a hard Brexit when it comes to the cleared derivatives markets, including the helpful efforts of our two keynote speakers today.
Here in Europe, FIA worked with the European Commission to gain a one-year temporary equivalence for clearinghouses to minimize disruption to our markets.
Unfortunately, this relief was granted anticipating a March Brexit date and now we again find the relief ending next spring with no solution for continued access.
Next month FIA will work with other trades and industry participants to formally ask the E.U. to extend the one-year equivalence as the uncertainly around Brexit drags on. We will continue to reiterate our call for temporary equivalence for trading venues and repositories.
These measures are critical because we don’t want this regulatory uncertainty to exacerbate the market volatility that may come with Britain leaving the EU. Brexit is an all-too-real reminder why cross border recognition is so vital to our global marketplace.
Right now, you can trade, clear and settle trades anytime and anywhere around the world because customers demand it. Risk management does not stop at borders. Unfortunately, laws and regulations do and thus the conundrum. Thankfully, the international regulatory community has developed a “trust but verify” regulatory system that enables authorities to recognize foreign laws and regulations when they are deemed “equivalent.”
This cooperation between regulators has worked remarkably well over the last 40 years, including during times of distress. As former CFTC Chairman, I know firsthand how well this worked during the financial crisis. But why should ordinary people care about any of this? Why do my friends’ eyes glaze over when I talk about what I do for a living? Why do derivatives markets matter? They matter because a thriving derivatives market is an essential lubricant for global growth.
Derivatives are important tools for main street businesses (or Main river businesses here in Frankfurt) to hedge unwanted price risk and free-up capital for job growth and economic expansion.
These users of derivatives are the same companies that employ millions of workers in manufacturing, energy, finance and agriculture and form the backbone of our global economy. That’s why our markets matter.
I’ll conclude by restating how thrilled we are to be hosting this Forum in Frankfurt, and to have two outstanding keynotes with MEP Markus Ferber and BaFin’s Elisabeth Roegele.
Before we kick off, I do want to take a moment to thank Eurex as our event sponsor for their support today. We could not do these events without such partners.
Now it is my pleasure to introduce BaFin’s Deputy President Elisabeth Roegele to the stage.
Ms. Roegele has served as Deputy President since August of 2018, having a wealth of prior experience in both the private and public sectors. She currently serves as the Bafin representative on the Management Board and Board of Supervisors of ESMA as well as IOSCO.
She is no stranger to our industry and is known as one of the more thoughtful and respected policymakers overseeing our markets, and we are thrilled to have her here today.
Ladies and Gentlemen, please welcome BaFin Deputy President Elisabeth Roegele.