YouSaid · the spoken record

Huw van Steenis

lines on the record: 34
first: 2019-09-09
most recent: 2019-09-09
sittings or episodes: 1
sources: podcast

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“And yet, you know, the world is developing and is moving at a pace. And so you do need to keep very open, alert, and engaged. I think that was one aspect. What the bank regulator of the future should look like. I was probably spending more time thinking about data analytics, digitization of data, taxonomies, quite frankly, data science than I was thinking about PhDs in economics.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think I mentioned that Bill Winters, who had previously done a review, said I should get access to the Gold Vaults on my security pass, but that I realized that was a joke. And when I tried to get in, there were people with guns. So I'm afraid I never found out how much of the gold Gordon Brown sold off. But no, I think it was two things. One was we hosted a large round tables and to try and keep them, you know, bouncy, a bit, you know, we had typically, you know, four or five people from the incumbents, four or five attackers and a few, you know, clients to ground the conversation so it just didn't become sort of finance babble. And it became really crystal clear to me that some of the fintechs, not only are challenging the status quo, they don't even know where some of the rules are. And I think that's a very odd environment for regulators to comprehend and therefore, you know, the natural Pavlovian reaction to that is to sort of close up.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“And make sure you get the appropriate data. And the other thing is regulation is blooming complex. So the UK rulebook is longer than the complete works of the Old Testament. And unfortunately, gets updated regularly. And so, you know, this is no one individual can keep on top of that data. So it's not just the regulator, it's the people at the banks themselves who are trying to keep on top of a gargantuan amount of data. So without embracing technology and quite frankly, embracing cloud technology so banks and regulators can communicate their data more cheaply, more effectively, I think is going to be part of the secret source of an effective central banker in the future.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, I mean, I was blessed that everyone was very happy to help out, and so I met with over 300 entrepreneurs, techie, CEOs, cyber experts, many other policymakers around the world lent their hat too. So I was able to dig deep. I mean, obviously, I have the humility that even in a year, I could only scratch the surface of some of these important questions. I think that one thing that I put my finger on is that it's still quite a paper-based world. And so if you're sitting there as a regulator, I calculated that the average bank regulator is receiving the complete works of Shakespeare twice a week in terms of data. Now, you simply can't comprehend that without modern technology. And if, you know, going back to my life as a research analyst, you need to automate feeds. You need to create alerts screens. You need to completely rethink the way you run with hypotheses.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Scenarios that the regulator of the future is more like on the Star Trek enterprise with the data coming in automatically to screens and understanding so they can get their finger on the pulse much more quickly and what is quite frankly a complex and challenging world.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“The cream, what standards do we hold them to, particularly knowing that the network effects are so powerful that when a firm is large, like let's say the Chinese payment firms, it's very difficult to row them back. And so, you know, one reason why I think the bank talked about making sure they want to get ahead of Libra rather than just respond when it's out is to try and think through firms which could become systemic and get further ahead. I think the other aspect, Tracy, which is slightly more basic, but I think is really important, which is the central bank needs to have the capabilities and the kind of know-how of the tech world. Most central banks around the world are dominated by outstanding public servants who have got PhDs in economics. And I think that's an important skill set, but we need to make sure that they also have much richer understanding of cyber, of technology. And the tools. And so, you know, one.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, look, I have the humility to know that I thought about to try and think about scenarios because none of us are clever enough to be able to forecast the future. So let me turn it around saying the scenarios that I think policymakers really must think through. So one would be that if we have a two by two of the rate environment and have the degree of disruption, the one where we have negative or low rates and high disruption is very challenging for the banking system. So thinking through what does that mean then for scale, their budgets to respond, what can they be allowed to do in response to these competitive challenges, potentially changing what market shares they can have to try and have more scale. That's something I think is really important to weigh up. A second is if Big Tech in the scenario where big techs become really important or at least even fintechs in a much broader range of players are skimming”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“The former Chancellor did commit the Treasury to looking at an updated payments regulation. As I said, I think what the Singaporeans have done of introducing a third category of large important payment firms, which are held to high standards, is at least an intriguing idea, which many jurisdictions, I'm sure, must be looking at. And the other bit is about reciprocity of data. So one of the big challenges is if the banks are asked to share their data with big techs, what do they get in return, or at least how do they get compensated for that? And so a level playing field information is probably just as important as having really high standards.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's why the other part of my report was to argue for updating payments regulation. Now within the UK, that's obviously a role for the government and they're kind of busy at the moment with other things”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, so I think the way the present I see this through is having a level playing field. It's not the job of the bank to pick winners or losers, but provide the infrastructure and set of rules and standards to ensure that there is just a great suite of financial services which are safe and secure for society. So I view this much more about the leveling the playing field. So on one hand, if there are some really high quality payment firms who pass some pretty high hurdles of security, cyber security and resilience, then why shouldn't they potentially have access to park money at the central bank overnight and help foster competition? But the other aspect of a level playing field is the payment firms or the big techs have to be held to the same standards as banks. So whether that be with knowing your customer and anti-money laundering controls, whether it be cybersecurity, whether it be”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Third is, it really will be about becoming a low cost manufacturer. And so I think there is going to be relentless hard work for bankers in making sure they've got a lean and a very effective platform because throughout my professional career, let's take sort of when I used to sit on an equity trading floor many, many years ago before we got moved into the research box, the commissions have gone down through thick and thin, double digit year by year. And I think that banks have been able to confront that through becoming more efficient and more scaled. So I think there's a lot of industrial logic which needs to flow from this, but they'll probably need a bit of luck as well.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there are no, I firmly think there is, and I think we go back to this that its first technology at one level allows many new entrants, but also provides real-scale economies. And in a world where, let's say, large corporates are obsessed, rightly obsessed about their security, their money, the firms who've got the single best cybersecurity should win out. So number one, there's, I think, tech is becoming an arms race for the winning financials, winning banks. So I think that's one aspect which is really important. I think what flows from that is scale is more important. And so it may well be that actually the combination of low rates and tech actually accelerates more M&A, which is, you know, let's be honest has been somewhat on hold in recent times. And you can see that with a couple of recent US transactions, which have really been around payments and the tech space.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“That's definitely a concern. One, you know, Larry, someone's recently came up with the great analogy about black hole economics. The one that I've debated more with a bunch of academics I've been working with is it's more like steroids. Steroids and short blasts can be very effective in repair, but long-term dependency on steroids starts to dissolve your bones and makes the patient more brittle and maybe negative rates are more like steroids than other analogies.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think it's fair to say negative rates work in quote a myriad of ways. They obviously impact net interest income margin for the banks like the top line. But in some cases, as markets get revalued up, commission income, the sale of asset and wealth management products could increase. Low rates clearly have suppressed bad debts, and that's been a key defense of ECB and others in support of the policy. But when you really dig deep, it's probably more QE than negative rates who've done that because it's more about tackling the bad debt problems in Spain, Portugal, Greece, Italy, and arguably QE would have been more effective than negative rates in suppressing it. But, you know, as you and I and your listeners, though, that's already priced in. So at this point, lower bad debts is priced in. It's much more about what the next step is from here and a very unprofitable system is one which is more brittle. And so I think that's a...”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it does, but I think what you've put your finger on is a key difference between probably the Anglo Saxon world and some of the other systems where I think the Anglo-Saxon world firmly believes in a positive interest rate, even if it may be low. I think second is, you know, because macroeconomics have just assumed this way, there is very, very little in the literature that central bankers are relying on to understand how this works.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Negative rates is a key component. So I think it's a tough experiment. And that's before we go on to people storing cash in deposits and being disincentivized. So I think it remains a high-risk experiment here three or four years on.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Bank working paper, both of which you challenge the orthodoxy and say actually, if you ignore banks and insurers, you do it at your peril because as you get towards low rates and move into the Alice in Wonderland world of negative rates, the credit transmission simply becomes much less effective. And I think that's really something which policymakers need to weigh up as we think about confronting the global slowdown. I certainly for my vote would be heartily against any further moves more negative. And I think also what really struck me during the review is, you know, tech is really important, but also cyber defense. European banks, particularly Eurozone banks, are spending almost half the proportion of their tech budgets on digital transformation than their US colleagues. Now, some of that is being subscale. And, you know, we can debate whether there should be more M&A in Europe, but some of it is just the lack of profitability and of which”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“So, look, on this, I should really say this is my personal view than the bank's view. But obviously, we don't have negative rates in the UK. When I was Morgan Stanley, I argued vociferously that negative rates were a high-risk experiment. And in particular, that most of modern macroeconomics takes the financial system and then assumes it away, just basically ignores banks and intermediaries and their own actions. And I think ignoring that friction comes at a cost. And you can see that the way that negative rates are played out is, you know, you were discussing a few weeks ago, Japanese bank, regional banks are the least profitable in the world and actually have really been sort of supported by clipping coupons as government bonds get revalued. I think that the corrosive impact of negative rates on bank profitability is very strong. And I think there's been two great new papers, one by Professor Charles Goodhart at the LSE and another at Nord.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a big debate as always about what is the right mandate for the central bank. At the moment, it's society's decision how we pay, not the central banks. And so I think that the Bank of England, like other central banks, takes it as a political decision what the future of cash should be. And if you look at the sort of debates in history, I mean in the 19th century there were some pretty big debates about who had the responsibility to print money. Should you have private sector money or not? Today we're going to be debating how much should there still be cash in the system. I think over the next 10 years, what we're talking about is not cashless, but just increasingly cash light as year by year more payments are done online. But I think it's really a political discussion. And if you look in Sweden, it's getting more intense about where the politics lie. And I think at the moment the assumption is there should be some cash to allow people to transact.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“To at least maintain that cash system. And so you end up with some quite out there discussions of should in the long term it be the responsibility of the state or the central bank to keep the cash economy viable. And I think for many listeners in the states, that sounds like a bit of sci-fi, but it's something which in Norway and Sweden where less than 10% of transactions are now done with cash is something which is pretty important.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Why, yeah, I think that is, and I think that, but it is interesting that quite a few of the payments firms are trying to rely on the know your customer checks that the banks do, and then they don't get rewarded for it. And so there is, to be honest, a slight unlevel playing field between payment firms and banks in most, but let's be honest, not all jurisdictions. But the third thing, Tracy, though, is coming back to actually who's been left behind. And I know that I was struck by a huge interest in what does the decline of cash mean for those who potentially may be getting left behind, whether it be elderly, disadvantaged, or potentially disabled. And if you look at Sweden, where cash has fallen by 80% of the last decade, they start to hit some crunch points. And one thing that I spent some time looking at in the review is how close are we to those crunch points in the UK or in other markets? And what would you do to make sure that there is a minimum or even a viable infrastructure?”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“So, there's a couple of things, and it does vary country by country. So, first is around innovation. Most geographies want to encourage innovation of new firms, but in many jurisdictions you've got a concept of a startup or you've got a systemic financial payments firm and very little in between. And so as I was struck that the Singaporeans in the last year injected a new third category saying, actually, if you've got half a million and a million customers, we need to deal with you in a different way. And so payment regulation has to probably be updated to reflect that these are now very large firms, which may not yet be systemic, but whose failure would be pretty brutal for the system. I think second is around what it means for the banking system. Are you skimming off the cream of profits for banks and leaving them just simply as dumb pipes in the words of one of my colleagues who looks at this space? Or maybe...”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think that battle is really about what China shows us is that the new entrant got distribution incredibly quickly. And I think as you look into the states, you've got some pretty serious payment firms, Visa, Mastercard, Amex, PayPal, as well as some of the key banks, JPOG and so forth, which have got really big positions in payments already. I think two, very few big techs want to have the hassle of bank and payments regulation and all the capital that goes with that. So most of the firms so far have tried to be a wallet or a toll road on the back of the existing banking system. But what I think we could see is that over a period of time, these firms could grow broader and deeper. And many of the financial fintechs that I met have ambitions for, you know, quite frankly, world domination. And I think, therefore, it's about making sure that the banks and the payment.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so first, you've already got some pretty strong competitors, and I love Alex Roundpull at A16Z, has got a great line that the quintessential debate between an incumbent and a new entrant is does the new entrant get distribution before the incumbent gets innovation?”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Have purchased on different parts of the financial system. And so you've got one financial supermarket, which is a bit different. The other area which is different to China is identification. There is an element that everyone has identified. And one of the big issues that everyone's wrestling with in the West is how you can reduce fraud and how you make sure you know who your client is. And actually some of the emerging markets probably have leapfrogged the West on this and maybe, and obviously, quite frankly, have a different sense of libertarian values about what the state should or shouldn't know about you.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Think it's a really important exam question to think about what we can understand and what may be borrowed from other markets and what's different. So first is the payment firms are really pump primed by a big tech firm. So whether it's Ali with ant financial or WeChat with WeChat Pay they use their existing clientele and network effects to hugely to their advantage. I think second is though they really did offer phenomenal promotions to get acceptances. So in one case they offered taxi drivers in Beijing a premium if clients paid with at Early Pay and also gave the clients a discount if they paid. So they were really smart about discounting and generating client interest. And the third of course is maybe what is different is they've got a whole financial supermarket. Now in most Western regulatory structures different regulators have”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“And as a result of that, they just don't have the tech budgets that some of these other firms have. And I think the other bit is that, you know, I mean, I met with over 300 entrepreneurs and fintech companies for the review I did for the governor. They have a very different profit motivation. They can withstand losses for three, five more years. There's not a single bank which can really do that for a five-year basis. So they just start with a very different basis of competition.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there's an element of an unlevel playing field where they are coming in on a different basis. But it doesn't have to be that the big techs win. I mean, just go back to Sweden. Swish is a bank consortium app which allows anyone to pay whatever anyone. So you need to get over the hurdle of antitrust about how banks collaborate with each other. But there's a country where actually it wasn't the big techs who drove the innovation. So I think this is much more about do the banks have the budget do they have the ability to respond. And of course, going back to one of your favorite topics in a world of negative rates, bank profitability is pinched.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that's really atypical, and I think that's something which that means it's really difficult for a traditional policymaker regulator to get their heads around because there's just nothing there.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Transformation, but I think the big thing for financial regulator and a particular central bank where money is what it's all about is the role of big techs either becoming a toll road that they just want to be the toll which people get into the commercial world, but potentially becoming much bigger in financial services. And with their advantages of scale, with other related businesses, and quite frankly, a way of thinking which is very different from financial services. So if you take the Libra white paper plus all the other papers they put out on that day, you know, there's over 80 pages on the tech, there's just under a dozen pages on the way the syndicate will work. There's not a single page on regulation.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“In financial services, particularly low rates, there are not that many areas which have got strong growth. And payments clearly is one where people are moving offline to online. I mean, one thing that we unearthed in our report was that let's take Sweden, we've had an 80% reduction in cash transactions in the last decade. The UK is probably four or five years behind that. The US is probably another four or five years behind that. There is a very long tailwind of shifting commerce online and everyone wants to be the gateway into the online commercial world. So I think that's one key aspect around payments. I think second is these person-to-person apps, whether it's Ali in pay in China, whether it's Swish in Sweden, whether it's Idial in Holland, these are sort of category killers. You know, they really munch through cash and are provide convenience and flexibility for customers which customers are quite frankly lapping up. So I think there's that.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Combine what they've got in China and India, it's over a billion five times Citigroup. So I think that this payments both in terms of currency and in terms of new entrants being the battleground, I think he's put his finger on something really important.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Second is that payments is the battleground between big tech, payments firms and banks. And it's kind of existential. And as you've pointed out, regularly, Tracy, the combination of negative rates and a disruptive environment is one which is an existential threat for banks. And I think the challenge for firms entering payments Libra, Facebook is just the first of which most recent of which is pretty challenging. And I think that one pushback that some had is that this was a little bit right out there in terms of forward thinking. But one question I often got challenged is what can we learn from the Chinese financial system? Is it just the Galapagos of the financial world? And I think it's not science fiction. I mean, there you've got ant financial and WeChatPay controlling 90% of online payments. And Ant Financial Now has got the most customers of any financial services firm in the world.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, look, I mean, I'm going to speak for myself here rather than for Mark. I mean, I thought it was a really great speech because it put its finger on a number of the dilemmas that policymakers are wrestling with. I mean, first, let's be clear, technology is transforming the basis of advantage and financial services, and big techs are entering, fintechs are playing, scale is far more important, and the regulations need to catch up. So I think first and foremost, it's about the way technology is transforming the system.”
2019-09-09 · Odd Lots · Huw van Steenis On What Central Banks Will Do Next · IDENTIFIED FROM THE TRANSCRIPT · source