Succesful seminar 'Ensuring access to capital'
Research seminar on banks and society18 apr 2018 09:12 | CAREM
Banks, governments, and the society are inextricably linked. That was the conclusion of an international seminar organized by the Professorship Corporate Governance & Leadership on March 29th. During the seminar, an international team of scientists and practitioners exchanged present-day ideas about governance in banking. Thanks to vast regulation, a few large banking systems have emerged over the past 30 years in the Netherlands, banks that are too large and too important to be allowed to go bankrupt. Regulation makes it difficult for new entrants in the banking sector to acquire market share. However, new forms of financing are slowly appearing, such as credit unions and crowdfunding platforms and new technologies are emerging, for example, the blockchain, crypto-currencies, and data analysis. The government is struggling with the question of how to regulate these new developments. Without regulation, it is possible that companies will abuse the state of affairs. However, if the government regulates too much or too soon, new developments will not be able to take off and flourish.
During the seminar, these questions were addressed by various speakers. Arnoud Boot, a professor of finance at the University of Amsterdam, stated that the government had failed to give the society enough 'counter-power' when it deregulated the financial sector, leading to a disbalance at the cost of the society.
Kurt Mettenheim, a professor at the Sao Paolo Business School, discussed other banking models. He stated that the world has many large public banks, as in India, China, and Brazil. These banks work well for the society and have sufficient economies of scale while giving priority to the public interest and social inclusion. However, public banks may also lead to corruption and the implementation of policies leading to environmental damage, for example, the deforestation in the Amazon.
Another question is how governments should deal with near-money and shadow-banking. Banks exist by the grace of 'market failure' and human fallibility. It is worrisome that no one knows exactly how much the bail-outs of banks after 2008 has cost the society or what the effect will be of the ‘quantitative easing measures’ in the western world, while we see that the enormous growth and gains in the derivatives market are concentrated at four big American banks.
Like other speakers, Mettenheim advocated that we could learn from 'old' forms of banking, as cooperative banks and credit unions. They dominated the market for a long time and can still serve as a good alternative for the commercial banks that are today setting the tone. More diversity could prevent systemic risks in the financial markets. More and different types of banks in the market will create a diversified landscape of banks, in which a commercial bank could go bankrupt without strong harmful effects on the real economy.
"Finance" needs to come closer to the real economy and move away from continued ‘financialization,’ creating financial products that are not related to the real economy but only serve to generate financial profits. The increasing number of new financial products and the uncontrollability of these products can still lead to unforeseen disastrous social consequences. It is of key importance that the society offers a counterweight to the power of large financial institutions and obviously the government should play an important role.
Like Arnoud Boot, also Thomas Steiner (Triodos Bank) discussed the gap between the real economy and 'financialization.' Triodos bank has grown very rapidly in recent years through explicit social and environmental policies. What matters is that customers know where their money is used. Unfortunately, this down-to-earth approach to banking has become under increasing pressure. Central banks keep interest rates artificially low, and as a result, the margins of Triodos have been reduced significantly. It is increasingly difficult to provide savers a reasonable interest and entrepreneurs a fair loan.
Roland Lampe and Margot van Kempen
Other insights are gained by the input of employees' representatives, which is uniquely regulated in the Netherlands. This method directly contributes to the pursuit of public values in the boardrooms of Dutch banks. At the Seminar, Margot van Kempen, the chairman of the works-council of ABN AMRO talked about their important role in the governance of a bank.
And of course, there are a few banks in the Netherlands, such as Triodos and ASN, that since their founding has included the public matter and sustainability into their mission. A special feature of this is the rise of the Credit Unions. Roland Lampe highlighted their origin in the Netherlands. Still, they are very small organizations. Still, they very slowly succeed in reaching more and more entrepreneurs who would otherwise not have been able to develop their business further. Crucial to credit unions is that the bank serves the community, a community that also leads the bank.
It became clear that under the influence of 'financialization,' digitization and the urge for efficiency, the method of transaction banking has changed enormously in the past decades and will continue to change. In response to this, new forms of banking also arise, in which attention is paid to the public values, sustainability, small-scale entrepreneurship, the human relationship, craftsmanship and mutual aid to move forward. Within this development digital innovations (fintech), shareholders and also government regulation have not a leading but a serving role.
Presentations and articles of the morning programme
Morning programme: Paper development session - March 29th 2018 - 09.00 – 13.00 uur
09.00 - 09.45 Thomas Marois, SOAS London: The public bank resurgent
09.45 - 10.30 Jan Zonneveld: The impact of state-intervention on Dutch Banks
10.30 - 10.45 Break
13.00 – 14.00 Lunch
(Thirty minutes presentation, 15 minutes discussion)
Afternoon programme - March 29th 2018 - 14.00 – 18.00 uur
14.00 - 14.15 From Raffeisen to Collin Crowfund
Welcome and some introductory remarks
Frank Jan de Graaf, professor corporate governance & leadership, Amsterdam University of Applied Sciences
14.15 - 14.45 The Future of Banking: From Scale & Scope Economies to Fintech
Arnoud Boot, professor corporate finance and financial markets, University of Amsterdam
14.45 - 15.15`Back to the Future of Alternative Banking`
Kurt Mettenheim and Olivier Butzbach, both professor of political economy, respectively at São Paulo Business School and University Campania, Naples
15.15 - 15.30 Break
15.30 - 15.50 ABN AMRO, size and financial services, and employee-representative perspective Margot van Kempen, chairman employee council ABN AMRO
15.50 - 16.10 Creating a societal agenda via banking; Triodos Bank
Thomas Steiner, director corporate identity Triodos Bank
16.10 - 16.30 Developing credit unions within a highly institutionalised market
Roland Lampe, Chairman Kredietunie Nederland
16.30 - 17.00 Discussion, chaired by Jeroen Veldman, Cass Business School
What should companies, governments and stakeholders do to ensure sustainable innovation in finance?
17.00 - 17.30 Drinks
The meeting is held under the Chatham house rule