Speakers at a panel discussion at Deutsche Börse Group said European monetary policy will continue to shift from a “long period of low interest rates and abundant liquidity supported by central bank liquidity support programs to a post-pandemic wave of monetary readjustment and monetary tightening.” “The situation is moving towards a “situation.'' Global Fundraising Summit held on January 31, 2024. The conference, held under the rules of Chatham House, saw industry executives and government officials discuss market trends and offer their views on the summit's theme, “The New Paradigm.''
The speaker pointed out that during the “best of eight years” interest rates were negative, and the sharp rise in interest rates reduced excess liquidity and led to higher funding costs in the market. Financial companies are under pressure to rebuild their systems in line with new market conditions.
“It’s not just a business cycle.”
Another speaker said that in the decade after the 2008 financial crisis, central banks adopted “accommodative monetary policy to actually support markets and support economic growth,” which led to great stability. said. “I think the paradigm we are in now is completely different,” they argued. “Flexibility is significantly reduced. Central banks are focused on their ability to stimulate inflation and the subdued growth prospects in many countries.”
Investors now need to be more tactical. “I think it's really important to recognize that this is not just a business cycle,” the panelists argued. Macro changes are underway, with an aging population, a shrinking workforce, artificial intelligence, the transition to a low-carbon economy, rewiring supply chains, and geopolitical tensions coming into the spotlight. These themes are here to stay, they said, and 2024 will require a more tactical and more aggressive asset allocation compared to previous paradigms. “I think this is a big change.”
Being able to move quickly will be important — meaning the operating model will need to be more rigorous, the people said. On the other hand, rising interest rates mean that if something goes wrong, for example an overdraft or a late payment, everything will cost more.
Alternative financing and financing options
Panelists also discussed the importance of alternative financing and financing options during the meeting.
One speaker said that if we can “create a diversity of borrowers” and meet those needs, “then…if there is an appetite to borrow securities in other parts of the market, that could happen through the program. There is.”
Considerations include ensuring that routes to market are relaxed and that the necessary systems are set up to make it as easy as possible for customers to access the widest range of available borrowers; The key is to ensure that you can do what you can. number of lenders,” the official pointed out. “I think there is definitely a place for peer-to-peer, even in a world where there are constraints and different borrowers.”
Is this really a new paradigm?
The theme of the summit is “New Paradigm”. But as attendees pointed out, people have been talking about new paradigms for decades. Are there any similarities between what is happening today and previous eras?
For one panelist, the truth probably lies somewhere in between. “There are always similarities in the periods of history that we've looked at. And the further back you go, the more likely you are to find something very similar.”
However, compared to after the 2008 financial crisis, central banks have been unable to support markets as they are focused “first and foremost” on fighting inflation. Given the aforementioned “macro forces” at play, “I think it's very difficult to argue that it's not inflation and won't lead to high inflation. So over the past decade or more, I think it's a different paradigm than what we've seen, but I agree that there are similarities to what we've seen in the past, and that's always going to be the case.”
In addition, artificial intelligence and digitalization have also “created a slightly different paradigm,” said another speaker. It is important to think about digital formats, what the new world will look like, the incorporation of new technologies, and how AI and other technologies can increase efficiency.
still optimistic
When asked whether they were optimistic or pessimistic about the future, panelists said they were optimistic. One speaker acknowledged that there are headwinds, but they also create new sources of demand and customers can take advantage of these opportunities to generate more revenue. Lower barriers to entry, such as central clearing, will allow smaller funds to participate in this market, they added.
Another panelist said, “We're not at a stage where we're talking about whether or not to innovate. Innovation is real, collaboration is real.” “I think there's a lot to look forward to. There's a lot of interesting routes to market… There's a lot of market considerations, but that means we need to find new ways of doing things. To do.”
Chatham House rules allow people to be cited, but not to identify them or their affiliations.
