Jean-François Serval speaks at the Labex Refi / Stony Brook University Summer School - September 2016
Posted on 09/27/2016On 7th September 2016, Mr Jean-François Serval was speaking at the Summer School organized by Labex Refi and the Stony Brook University about
« GOALS and EFFECTIVENESS in a Worldwide Competitive Environment »
Considering regulation and standardization as synonyms, the paper goes directly to the core of the topic. Standardization allows the widest use of financial instruments, with equitable access to market places clearings and fair competition required for obtaining participants’ trust. JF Serval limits the playing field with boundaries which are made of natural laws precepts. What is a property and a sale along with concept of don’t steal, don’t lie and what is considered as an evidence. The approach allows vast lands where regulation and Justice do operate. The innovation of JF Serval and co-author JP Tranié’s reliance on global approach where any un cleared transactions determines a balance which is part of the monetary system (M5 and M6). In using this definition, they can with modern processing tools, correct identification of participants have a granular observation more efficient than the aggregated one in looking at the interactions between real economy and the financial one to improve efficiency. Europe and America do regulate as they should and the question Jean-François Serval deals with is to know how coordinated because of G2O/ FSB their respective policies are in fact or do they play competitively. Evidently, regulation aimed at the limited scope of the financial institutions and others just miss the target of reducing shadow banking volume and by cost assert flows outside the regulated system. QE combined with imbalances works as a pain reliever but aggravates the risks with low interest rates policies and flooding the system with liquidities. Values used for RWA are setting a volatility risk requiring ever more regulation while the causes to trigger a collapse are not limited. A Cost in this approach where regulation is compulsory becomes a secondary topic compared with efficiency and risk. What are the ultimate recommendations of JF Serval? Redefine the framework of regulation. Try to set a leadership to come to a monetary reform where taking into account the cultures and legal traditions as well as financial realities. The playing field will be harmonized but not unified. General principles as well as infrastructures and regulations could be shared and not implementation that should be adapted.