Have we passed "peak finance"?
Lecture by Mr Jaime Caruana, General Manager of the BIS, for the International Center for Monetary and Banking Studies, Geneva, 28 February 2017.
Analysis of BIS international banking and securities data suggests that global financial integration has not peaked. First, the appearance of peak finance in cross-border banking positions is, on closer inspection, more regional than global. The deleveraging of European banks is better understood as a post-crisis cyclical development than as a secular trend. Second, one has to look beyond banking to the boom in global capital markets. Global finance has favoured bond markets over banking since 2009 in both the dollar and the euro. Third, all this is not only a matter of academic debate. There is a clear and present risk of a political reaction against global finance. Guarding against this risk requires recognition that global financial integration is not already in secular retreat. Global financial integration can play a key role in the spread of best practice and innovation and contribute to economic growth. Continued interdependence in international finance requires global cooperation in managing its risks and setting global standards with global implementation.