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Innovation and Regulation: What Inspiration for Europe and Japan? Illustrative Cases:

Innovation and Regulation: What Inspiration for Europe and Japan? Illustrative Cases: Accounting Framework. INTRODUCTION. GLOBALISATION IS A REALITY, IT IS A SOURCE OF GROWTH FOR THE WORLD THE CRISIS IS NOT JUST THE RESULT OF AN ECONOMICAL CYCLE, IT TRIGGERS:

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Innovation and Regulation: What Inspiration for Europe and Japan? Illustrative Cases:

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  1. Innovation and Regulation: What Inspiration for Europe and Japan? Illustrative Cases: Accounting Framework

  2. INTRODUCTION • GLOBALISATION IS A REALITY, IT IS A SOURCE OF GROWTH FOR THE WORLD • THE CRISIS IS NOT JUST THE RESULT OF AN ECONOMICAL CYCLE, IT TRIGGERS: • A NEW GOVERNANCE MODEL FOR THE WORLD • A NEW FINANCING MODEL vs REAL ECONOMY • TO FACE THIS REALITY OUR INDUSTRY NEED: INNOVATION « SMART » REGULATION

  3. I- GOVERNANCE ISSUES /: A MULIPOLAR DIVERSIFIED WORLD G20 Pinciples COMPATIBILITY HARMONISATION CROSS BORDER CROSS BORDER EU • ITS BACKBONE: • - GOUVERNANCE • - SINGLE RULEBOOK • REGULATION COMMUNE • AUTORITES (ERA) + ECB • - RESEAU DES CENTRES FINANCIERS • - INFRACTRUCURES DU MARCHE COMMUN • . PAIEMENTS • . CSD • . CCP • . ECHANGES 2 1 US ASIA 3 …27 Critical mass + competitiveness OTHERS…

  4. A TOP DOWN COHERENT GOVERNANCE FROM G20 to INSTITUTION G 20 PRINCIPLES WORLD FSB CONTROL TOWER « TOOLS » BANQUE MONDIALE FMI IOSCO REGION ASEAN / EUROPEAN Framework EU « Banking Union » REGULATORS CE A Robust risk chain from top to bottom • Risk appetite • Risk coverage • Risk monitoring ESB BCE ESMA EBA EIOPA NATION LEGAL / TAX Framework Local supervision TRESOR BDF AMF ACP CONSEIL D’ADMINISTRATION INSTITUTION Risk culture / manegement COMITÉ DES RISQUES DIRECTION DES RISQUES DIRECTION OPÉRATIONNELLE

  5. THE RISK CHALLENGE vs INNOVATION COMPLEXITY IS A GIVEN IN MODERN SOCIETIES : IT WILL INCREASE THROUGH TECHNOLOGY AND GLOBALISATION FINANCIAL INDUSTRY’S MISSION  HELP THE REAL ECONOMY TO HEDGERISK YESTERDAY’S PARADIGM: COMPLEXITY  COMPLEX FINANCE PRODUCTS  EXPLOSION & VICIOUS INTERMEDIATION POST-CRISIS PARADIGM: COMPLEXITY  SIMPLICITY (+TRANSPARENCY)  VIRTUOUS INTERMEDIATION  more research & innovation March 30, 2012

  6. THE RISK MACRO HEDGING CURVE INNOVATION or NEXT CRISIS ? SOCIETALCOMPLEXITY = RISK • THE RISKHEDGING TUNNEL • MACRO PRUDENTIAL SURVEILLANCE • BANKING STRUCTURES + RESOLUTION PLAN • MARKET STRUCTURES  REGULATEDOTCBASED ON LEVEL OF LIQUIDITY • ACCOUNTINGRULES HOW TO FOLLOW THE CURVE ? HOW TO MAKE THE NEXTCRISISLESSPAINFUL OR SYSTEMIC March 30, 2012

  7. II- A NEW FINANCING MODEL FOR THE REAL ECONOMY • THE B20 RECOMMANDATIONS : priority to growth via SMSs & INFRASTRUCTURES • WHY TO RECONSIDER POST CRISIS PRIORITIES ? • AS FOR OTHER INDUSTRIES, WHY INNOVATION IS KEY? - structural innovation  conditions for a robust competitivity • Strategical innovation what format for the financial industry, robust and safe ? How to optimize capital allocation , prudential vs production? Why universal banking model ? • Entrepreneurial innovation : clusters & innovative SMEs

  8. Smart reg Savings/ investors Growth Régulator Country 1 « Régulated » 3 3 3 Trust Régulator Country n Mutual recognition Financial intermediaries Solidarity Stability Corporate / SMEs Entreprises VIRTUOUS BALANCE & CHALLENGE (« 9 » 3+3+3) !

  9. FINANCING THE ECONOMY - Assets - Pensions - Deposit Global savings Domestic Savings I/ Investors: deep liquidity Alternative finance Regulated Transformation REGULATION SUPERVISION INFRASTRUCTURES III/ Credit Intermédiation & market risk « Transformation «  II/ Corporate: value creation State/ municipalities locales Productive assets Prudential assets

  10. A STOCK EXCHANGE AT THE CENTER • BLUE CHIPS vs SMEs • PRIMARY vs SECONDARY • CAPITAL FLOW vs LIQUIDITY • EQUITY vs BONDS • DOMESTIC vs FOREIGN • INDIVIDUALS vs INSTITUTIONS • LT FUNDS vs MUTUAL FUNDS • RULES • MARKET PRACTICES • SUPERVISION • TECHNOLOGY • DVP • CSD

  11. STRUCTURAL CONDITIONS : KEY QUESTIONS • MARKET STRUCTURE • IS FRAGMENTATION AN ISSUE ? FOR France, YES • REINFORCEMENT OF STOCK EXCHANGES • PROPER BALANCE vs MTF & OTF…. • TRANSPARENCY • PROPER BALANCE vs LIQUIDITY • BUT PROGRESS ARE NEEDED IN POST TRADE EVEN FOR BONDS • INNOVATION in BOND TRADING : A BALLANCED ORDER BOOK for LOW LIQUID INSTRUMENTS the CASSIOPEA project - LIQUIDITY / COLLATERAL CHALLENGE • THE UNIVERSAL BANKING MODEL: WHY IT IS STILL GOOD FOR EUROPE. • THE CRITICAL MASS & COMPETITIVE ISSUE • THE CUSTOMER SERVICE ISSUE • THE PRODUCT ISSUE  STONGER LINKS BETWEEN CREDIT & MARKET WORLD, A COMPLEMENTARY CHAIN OF SERVICES - IMPROVEMENT OF THE RISK MANAGEMENT CHAINE IS MORE EFFICIENT THAN JUST CAPITAL BUFFERS

  12. WHY ACCOUNTING RULES ARE STRUCTURAL ? • ACCOUNTING IS ABOUT VALUES = MEASURE OF ECONOMICAL SUCCESS • IT IS A « TOOL » FOR MULTIPLE PURPOSES • CORPORATE MANAGEMENT • LONG or SHORT TERM INVESTORS • TRADERS • REGULATORS ( PRUDENTIAL) • DEEPLY LINK INTO LOCAL PRACTICE & CULTURE • BUT GLOBALISATION IMPLIES SOME CONVERGENCE • TO FIND A COMPROMISE • IASB CONCEPTUAL CONSULTATION vs EU ACCOUNTING GOVERNANCE / the « EFRAG » ISSUE

  13. FINALLY TOWARDS A LONG TERM INVESTMENT STRATEGY • TO REBALANCE SHORT vs LONG TERM HORIZONS • A L T INVESTMENT STRATEGY RAPS UP COMPETITIVE CONDITIONS FOR THE REAL ECO • A NECESSARY DEFINITION • INSTRUMENTS : EQUITIES, BONDS…. • ENVELOPES: PENSION FUNDS, LIFE INSURANCE, EMPLOYEES SCHEMES, MUTUAL FUNDS… • IT IMPLIES ALSO SHORT TERM COMPONENT TO GUARANTEE A FAIR EXIST PRICE AT THE END, AN EFFICIENT MARKET PLACE IS A TRUST COMPONENT & CONDITION….  In EUROPE A GREEN BOOK TO FIX ORIENTATION FOR THE NEXT LEGISLATURE 2014- 2019….

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