Other parts of this series:
As European Union regulators press ahead with their efforts to integrate financial markets throughout member states, I am reminded of an observation from Jean Monnet, a founding father of the European Union. Monnet was the first president of the High Authority, the organization formed after World War II to manage the combined French and German coal and steel industries, which were merged post-war to maintain peace on the continent. Monnet envisioned that “Europe will be forged in crises and will be the sum of the solutions adopted for those.”
Today, more than six decades after the creation of the European Coal and Steel Community, financial services have become central to the European economy, a development born of Europe’s 2008 financial crisis. However, going forward, I believe that the integration of financial services throughout Europe should not be about just complying with common rules. That would be a rather constricted interpretation of Mr. Monnet’s prophecy and such a waste for financial services institutions (FSIs). FSIs also should be seizing upon the growth opportunities that integration offers them.
But as is often the case with opportunities, those standing before FSIs take the form of challenges. In this instance, they are challenges for the European Union as well as FSIs. To capitalize on them, FSIs will have to support the European Union in:
- Becoming the most competitive economy in the world.
- Making its more than 500 million citizens better-off.
- Transitioning to a sustainable, resource-efficient circular economy.
FSIs will have to transform themselves to meet these challenges. The foundation of that transformation will have to be innovation—which regulators as well as FSIs will need to focus on.
For regulators, that will mean not doing anything that purposefully or inadvertently chokes off innovation by FSIs. On that point, I am hopeful. In recent months, the European Union’s senior leadership has underscored that regulators must be careful to encourage innovation by balancing their own aspirations to open up European markets with restraint against regulating too soon or extensively.
Given the mindset of regulators, FSIs cannot afford to fail to transform themselves. Over the next couple blog posts, I’ll share several ideas on some innovative approaches FSIs ought to consider taking so they can not only survive following financial services integration across the European Union but also thrive.
Next time: Two ideas on where financial services institutions can innovate.