“I do not think that banks are the origin of all evils,” said Luxembourg Finance Minister Luc Frieden, speaking at an FT Global Summit on international financial centres (IFCs). What is needed is “moderation and strengthened supervision.” That means “rejecting excessive behaviour”, he continued; “it means thinking about the long term effect of your investments: they must support and build the real economy.”
On the regulatory side he advocated global rules, with the G20 taking into consideration the financial centres outside its membership. “We need the same rules applied in the same fashion; we need more fiscal integration,” Frieden explained afterwards, admitting that it was a “daily challenge” finding the right balance between regulation and bureaucracy. “Regulation is an instrument that can and does support innovation,” he stressed, citing the AIFM Directive as an example.
Frieden went on to welcome the appearance of new IFCs all over the globe in the last ten years. “Competition is good for us,” he affirmed, pointing out that there were six flights a day to London and that Switzerland is Luxembourg’s second largest customer.
His advice to budding IFCs was to specialise. “You can’t do everything. We specialise in investment funds and private banking, especially in investment funds” he continued, adding that in order to be successful the financial sector cannot be an ancillary activity. “There must be a clear government strategy to develop financial services as a key sector.”
He finished by advocating regular meetings between IFC representatives, a commitment to excellence and a new code of ethics. “A lot of people lost money,” he said afterwards to Brian Caplan, Editor of The Banker, “but we need banks.” ER