Arvid Ahrin comments the NFU Key Issues Paper
Today, NFU publishes a Key Issues Paper on the important of traditional finance in achieving growth in the Nordic and European economies and societies.
So what does traditional finance mean? The concept represents a number of core values that NFU believes are necessary to build financial sectors that contribute to sustainable growth. There must be a balance between economic and societal objectives in the activities of financial institutions, who should have a stakeholder approach with local commitment and consumer focus. Finance should aim for long-term and sustainable profits and be safe and resilient through risk assessments and compliance to rules and regulations.
But traditional does not mean to dwell in the past. NFU wants to take the values of traditional finance into the future.
Europe has a growth challenge. There is a clear need to boost growth that is sustainable on the long-term. As part of the future strategies that are being drawn up by European policymakers the values of traditional finance should play a key role. As new types of funding channels are sought out, it is important to retain the key role that sound credit assessments and knowledge of local economic context plays to ensure financial stability.
At the same time, the legal framework should treat all financial services providers according to the same standards. Policymakers should work to ensure that also the regulated parts of the financial sectors can contribute to growth. The proportionality of regulation is one of the key concerns in this context. As financial regulation is reviewed in the near future, the safe and regulated financial sectors must be allowed to play its role again to the full – to support long-term growth in Europe.
New institutions are also considered as investors for boosting European growth. Insurance companies and pension funds can play a role in this regard. Whilst the long-term commitments of these institutions make them interesting actors for investments in growth, their role should be specific and needs to be debated publicly. At the same time, the alternative actors’ investment decisions should contribute to balanced ROE targets in financial institutions.
As digitalization changes the face of finance at a rapid pace, the essential relationship between financial services providers and their customers must stand center stage. And for this relationship to work, financial services need people. Competent and motivated employees are a key asset to rebuild the consumer confidence that has been lost throughout the financial crisis. And competent and motivated employees require investment in employees – and investments in companies’ social capital: relationship-building, information, consultation, competence, and time to provide quality service to the customers.
In the end, it all really boils down to one thing: trust. Trust has always been, and always will be, the foundation of finance. The values of traditional finance described in the first NFU Key Issues Paper are necessary rebuild trust in financial services and to achieve sustainable growth in Europe. Tomorrow’s financial sectors need to bring the best of the past into the future.
Arvid Ahrin, General Secretary