Speeches & Transcripts

Development outlook of the non-banking financial sector: International Conference hosted by the Bulgarian Financial Supervision Commission, 14 December, 2011

December 14, 2011

Markus Repnik International Conference hosted by the Bulgarian Financial Supervision Commission, 14 December, 2011 Sofia, Bulgaria

As Prepared for Delivery

Mr. Chairman, Ladies and gentlemen, 

I am glad to be here today together with my colleagues from the World Bank.
This conference is about the financial sector, the non-banking financial sector in Central and South East Europe. 
If one asks citizens across Europe today what they think about the financial sector, one might hear two words: problem and crisis.  
Citizens across Europe increasingly perceive the financial sector as a problem, as a root cause of the 2008 crisis which now has transformed into a sovereign debt crisis in some Eurozone countries. 
This is crucial time and this is the right time to ask how capital markets can offer an important complement to banking, it is the right time to discuss how to best develop the non-banking financial sector. 
And this is what today’s event is about – finding answers to three important questions, three important aspects of the financial sector in Central and South East Europe: 

  • How to improve the functioning of capital markets?
  • How to best invest pension funds? and
  • How to protect consumers of financial sector services and products?

First, how to improve the functioning of capital markets?
The objective of companies and governments is to get financing at low costs, and the objective of investors is to increase the value of their investments.  So, how to ensure that both objectives are met, in other words, how to improve the functioning of capital markets in Central and South East Europe? 

Governments and regulators have a key role in shaping capital markets so that they become more effective.  Unfortunately, domestic capital markets in most Central and South East European countries only play a modest role so far.  Why? Because countries in the region tend to be small, and hence domestic capital markets tend to be small. 

Therefore, the challenge today is to develop a regional capital market across national borders. This will allow access to more investors for local firms, and this will allow better investment opportunities for international investors. Developing more integrated capital markets in the region is important, and coordination of policy makers across borders is crucial.

Second, how to best invest pension contributions in a wise and secure way? 
We all pay our monthly pension contributions with the expectation that the value of our payments would increase over time to at least cover inflation losses. In order to achieve this objective, pension funds need to invest our money wisely in the capital market. But how to do this in a way that achieves this objective and limits the risk of potential losses from these investments? 

As for any investment, one should not put all eggs in the same basket. For pension funds, this means diversification of investments, including country diversification.

Third, how to protect consumers of financial services and products?
As citizens, we use financial services and products. We have bank accounts, we take loans, we save money. But financial services and products have become increasingly complex. What do consumers need in order to make informed decisions, what protection do they need?

What is needed are clear rules, effective supervision, and responsibility.   Clear rules  to help citizens understand their rights as consumers of financial services and products. But while rules and their effective enforcement are important, they are only complementary to the corporate responsibility of financial sector institutions, the responsibility to educate consumers and act in their best interests.

Ladies and gentlemen, 
This conference is about capital markets, pension fund investments and financial consumer protection. And this conference takes place at turbulent times.  Answers how to strengthen Europe’s financial sector are needed.  

I believe that we all - as professionals related to the financial sector - don’t want to be seen as part of a problem, we want to be part of solutions.  And we are here together today for an important event that aims at identifying answers and solutions on how the non-banking financial sector in the region can be further strengthened.

In this sense I wish you and all of us inspiring and vivid discussions - for the benefits of all citizens.  

Thank you