In the only Europe-centric session at Sibos in Frankfurt, Swift’s Marianne Demarchi led a conversation titled: “View from the Top: Securing Europe’s financial future – Resilience, autonomy, and global impact.”
The panel consisted of Andrew Bester, ING; Piero Cipollone, European Central Bank; Stephanie Eckermann, Deutsche Börse; Bettina Orlopp, Commerzbank; and Valérie Urbain, Euroclear. Cipollone began by pointing out that, paradoxically, Europe holds a large amount of savings and exports a large amount of credit while simultaneously having a large need of investment.
In order to achieve strategic resilience in an era of fragmentation, he emphasised the importance of deepening the single market and finally developing a capital market to overcome the existing challenges.
One of these challenges lies in the geopolitical climate. Bester commented that uncertainty creates the need for centralised liquidity as well as visibility over liquidity, while Orlopp added that this reaction to uncertainty also depends on the type of company. While SMEs are focused on liquidity and risk management, larger corporations focus on where to invest, highlighting the need for banks to be prepared for both scenarios.
When it comes to capital market infrastructure, Eckermann identified three key infrastructure priorities in Europe:
Simplify and reduce fragmentation by standardising the underlying regimes unleash the single market and strengthen the liquidity pool.
“Better utilising empty highways”: T2S exists as a pan-European settlement system that is underutilised. Pricing mechanisms could help boost participation.
Not losing the advantage and pace on the digital side that Europe has built. The region was early in adopting digital securities regulation as well as digital cash, but is since losing momentum.
However, there is also success on the digitisation side. “As capital market infrastructures, Euroclear and us [Deutsche Börse], we are very committed to standardise the Euro bond market, and with that, lay the foundation to digitise euro bonds,” Eckermann added. “This is the third largest liquidity pool globally. That’s a key contribution in bringing Europe’s competitiveness.”
Asked what was needed to create better capital market integration, Bester emphasised simplification and faster decision making for Europe’s future direction (specifically in light of reduction of red tape in the US). Orlopp highlighted securitisation, while Eckermann identified the need to fix the demand side and create pension schemes that are capital market-based.
Urbain added the need to develop investor profiles for different risk appetites, while Cipollone concluded that there are two avenues of how this deeper integration is achievable. On one hand, he argued, quick fixes help, yet the fundamental issues need to be addressed in order to create a truly integrated market. However, the panel agreed that the current sense of urgency as well as political cementum are reasons for confidence.
The conversation then turned towards how the industry will finance the two major priorities of green and digital transition.
From the bank perspective, Bester highlighted that we are already starting with a strong sector, that the liquidity and the capital to deploy exist, and that the partnership between private and public sector are crucial to drive more innovation.
Orlopp agreed that European banks have the balance sheets to support these transitions. However, “there’s a group which is very important for innovation, where we are absolutely lagging behind, and that’s everything around venture capital startups,” she examined. “I can say that in Germany, we’re pretty good in financing the early stages startups, because they only ask for a limited amount of money, but whenever it comes to larger innovations, you have to have deep pockets. The most important part is really that we ensure, also from a regulatory standpoint, that it’s attractive to stay in Europe.”
From a capital markets infrastructure perspective, Urbain explained that “new technologies [like blockchain and tokenisation] are certainly an accelerator of investors finding their ways in terms of instruments. On one side, improving efficiency and therefore, competitiveness. But on the other side, they’re addressing some of the expectations of investors, especially the younger ones, which, at the end of the day are the future of Europe. We need also to listen to them and see exactly what they are looking for.”
She further emphasised that the organisations need to find scalable solution which are profitable for everybody in the chain in order to be valuable in the long run. Since “the financing needs are gigantic, one thing which is also extremely important is that we need to continue to have markets which are attractive to international investors.”
Looking across the Atlantic, the US has announced the GENIUS Act earlier this year. When asked how the ECB is planning to facilitate the emergence of a large market for digital assets, Cipollone explained the two-pronged approach of their Ponto and Appia projects. Ponto is the short-term project, expected to go live by the end of next year, is designed to “ensure that those that wants to trade on DLT can do so in central bank money.”
Appia is the larger project, “to understand what the final game should be. Should we have just one big ledger where everything sits: central bank money, commercial bank money, tokenised deposit, stablecoins? Or should we have an ecosystem of interoperable policies? Those are very fundamental questions.” Cipollone further commented that this also presents an opportunity to create a digital capital market union.
Concluding the session, Demarchi posed one final question to the panellists: If you could pick just one bold step to secure Europe’s financial future in the next 12 months, what would it be?
Cipollone: “Legislation on the digital Euro.”
Bester: “Capital market union.”
Eckermann: “Take action now, the digitisation is there.”
Orlopp: “Pension reform.”
Urbain: “Be proud of the European champions.”