Perhaps no word is used more often to describe the current downturn of the global economy.
The ancient Greeks used the word “krisis” to express the idea of a key moment, a turning point enabling people to take clear and unambiguous decisions. This implies that every crisis embodies a chance to change things for the better. The current global financial crisis embodies for sure a chance for a new economic order. The Governments should act decisively to stimulate global demand and to preserve the stability of the financial sector. A meltdown of the financial system has been prevented and there is no doubt that ensuring the stability of the financial infrastructure and unlocking the credit flow remains a top priority. However this crisis shows that some fears about untamed globalization are not unjustified. But it also proves that in today’s world there is no alternative to globalization as a motor for growth and employment, thus fostering prosperity worldwide. The recent economic crisis was Western in origin but had global consequences. As trade finance dried up, global trade fell and demand collapsed. It revealed a divided and disconnected world. So our goal must be a market driven and social world economy that is balanced, equitable and sustainable. In short: a system that generates not fear and uncertainty but confidence and stability.
Growth can be green. High food and energy prices may pose economic and social problems but these can be addressed through environmentally friendly policies, increased investment in commodity-producing regions, and by green technology.
Policymakers have been implementing an austerity agenda and ignoring growth, yet the euro crisis continues. Even when paying down debt there is much that we can do to boost demand and generate jobs. Debtor countries need to save more, while saver countries need to spend more. If only the debtor nations adjust, then a deflationary bias is built into the global economy.
Emerging economies need to switch from export-led to domestically driven growth. So we need to boost social safety nets to deter excess savings; support small and medium-sized firms that are the key to job creation; and develop deeper and broader capital markets to help underpin domestic-driven growth.
We need institutions that are accountable and share common goals. This is no time for purely national political agendas; our response must be global to be truly sustainable.
It is clear that over the past few decades, as the financial system has globalized at unprecedented speed, the various systems of rules and supervision have not kept pace. This global governance gap must be filled in order to restore confidence and to prevent a crisis like this from happing again. Moreover the financial crisis revealed the sheer scale of the shadow banking industry and the extent of inter financial activity that had little economic benefit. But while regulators need to discourage such activities they also have to ensure that excessive regulation does not limit the banks’ ability to lend. Without trade finance, global trade suffers. The wrong type of regulation could encourage more businesses to shift into the shadow, unregulated industry, sowing the seeds of the next crisis.
For sure when listening to today’s debate on the banking reform, talk of splitting, capping, stress tests and ringfences all sounds very clinical and it doesn’t seem to refer to a person-centred business.
After all that has happened over the past few years people’s expectations of banks have never been lower. It’s the cultural aspect that seems missing in the debate on redesigning the financial system. Whatever rules banks have to adhere to, it is the people who lead banks and work within them who define the culture and ultimately determine what those organizations become. While regulations are of central importance and are always necessary, they can never be sufficient in defining how an organization operates. Sustainable banking is possible and it should address society’s needs.
In order to effectively address new and emerging challenges, the business community must ensure commitment, by providing appropriate resources and taking action, mainly in the fields of employment, innovation, education, social inclusion and climate/energy. This is also the idea behind the Europe 2020 strategy, launched in 2010 by the European Commission, focusing on the concept of “smart, sustainable and inclusive growth”
In the banking sector we have seen among our peers great investments in terms of sustainability governance (e.g. CEO presidium) and transparency (increasing number of signatories/applicants to international frameworks like GRI –Global Reporting Initiative- UN Global Compact, etc.).
Banks are also committed to promote discretional activities, but leveraging on typical financial skills and resources, positively impacting the communities (corporate citizenship) such as UniCredit financial inclusion programs for unbanked people (e.g. Agenzia Tu for immigrants) as well as financial education programs supporting consumers protection (138,000 people involved in UniCredit financial education initiatives)
We are aware that only adopting sustainable practices we can concretely contribute to generate a durable socio-economic environment that is a fundamental element for a bank. Each of us could be “sustainable”. Businesses together with public and private institutions of civil society share a variety of priorities, however they are more effectively realized through a complementary action, rising from a common and integrated vision. Today there is much more awareness on thisbut still a lack of a common vision.
Perhaps no word is used more often to describe the current downturn of the global economy.
Giuseppe Scognamiglio
