This year, Spain is a guest member in the G20. Why does the B20 and G20 play such a large role in your daily work?
Since the outbreak of the crisis in 2008, each G20 summit arouses a great deal of international anticipation. The upcoming summit under the German G20 presidency will be no exception. Early July, Hamburg will play host to the leaders of the 19 most important countries in the world, plus the EU, which together account for 85 percent of the global economy. Given the importance of the G20 for global economic governance, it comes naturally that we pay a lot of attention to the negotiations leading up to the summit. This year will be particularly important in light of the new players in the G20 – not least the new U.S. President, Donald Trump, – and the many difficult issues on the agenda
In 2010, the Business 20 (B20) was called into life to assist the G20 with actionable, implementable recommendations. Since then, we have been engaged in this dialogue process between the G20 and the business community of the G20 countries. The B20 has been of fundamental importance in constructing a bridge between the G20 and the business community. Since its creation, the B20 has presented over 450 recommendations to members of the G20 – the majority of them being implemented by the G20 members.
This year, as one of the co-chairs of the working group on Financing Growth and Infrastructure, I would like to highlight the need to finalize the implementation of the global financial regulatory agenda and the importance of fostering the digital transformation of the financial system. Both objectives will be paramount in order to seize economic opportunities and promote sustainable growth.
Fostering Green Finance is one of the central aspects of the B20 Recommendations this year. Which role can Finance Ministers and Central Banks play to fulfill the MDGs (Millennium Development Goals)?
A global sustainable finance strategy should be a common goal of all G20 Members. It is indispensable in fulfilling the 2030 Agenda and its Sustainable Development Goals (SDGs), which – being built on the momentum generated by the MDGs – focus on balanced economic and social development, economic growth, and environmental sustainability.
For that reason, open and clear communication, cooperation, and coordination among all players – organizations, international bodies, and standard setters – is of the utmost importance to enhance the quality of life and the social welfare of the societies in which we conduct our business. It will contribute to the maximization of opportunities and the minimization of risks at the same time. In fact, the current digital transformation can be used as the lever for the enhancement of information and its disclosure.
BBVA strongly supports sustainable finance and more than welcomes the wide range of initiatives undertaken in this field at the international, the European, and the national level. As such, we also support the recommendations of the G20 Task Force on Climate-related Financial Disclosures (TCFD) and the creation of High-Level Expert Group on Sustainable Finance promoted by the European Commission (EC).
In BBVA we are integrating the comprehensive social and environmental framework into our global strategy. In that vein, our response to the SDGs plays a key role, and for that reason, we are strengthening the Group’s social and environmental risk management promoting the development of business opportunities.
It is essential to achieve a credible, commonly accepted, comparable, consistent, and robust framework for all the stakeholders (private sector, governments, educational community, civil society). In that vein, reinforcing the legal framework behind the investments to promote the adequate incentives is a must.
Blockchain and Distributed Ledger technologies retain the potential to revolutionize global banking. Will we still have to visit a physical branch of BBVA in the future to get cash out?
Cash issued by central banks is a common feature of modern economies. Although the bulk of money is in the form of private banks’ deposits, cash is the cornerstone of the money supply. Until now, it has been technically impossible to create “digital cash” that is exchangeable anonymously among peers and without intermediaries, like banknotes. The development of blockchain technology in recent years now provides a cash alternative in the form of central bank digital currencies, which combine records (blocks) of distributed information and cryptography, allowing direct transactions among peers.
The discussion of the role of digital currencies is still in the very early stages and mainly takes place in academia and the conceptual arena. The most likely scenario in the short-term is the use of blockchain technology only for wholesale payment systems. Under this scheme, the CBDC (Central Banks Digital Currencies) would be held by banks and other participants in wholesale payment systems (but not by the general public), identified (as opposed to anonymous) and non-interest bearing. This scenario would be a gradual approach starting with the introduction of a virtual currency for wholesale payments and then taking well-controlled steps towards more disruptive variants. It will increase the efficiency of wholesale payment systems.
To sum up, whether blockchain removes cash or not, bank branches remain an essential part of our business model, but their role is changing as customers increasingly interact through other channels. Branches are, and will be, essential elements in our relationship with customers as they are the places where higher value-added operations and a more personal relationship take place.
If you had a wish to the German G20 Presidency, what would it be?
This B20 provides the global business community a unique opportunity to shape a more coordinated approach on global governance and provides a policy framework to face strategic challenges on the agenda for growth, trade, digitalization, and employment.
At BBVA, we believe that digital innovation can go a long way in improving and expanding the capacity of the financial and technology industries to finance more inclusive growth and to enhance access to financial services. We welcome the forward-looking approach taken in the B20 so far, but a lot of work still needs to be done to fully capture the potential of digital innovation, enabling four important aspects:
A more pro digital regulatory environment: designing appropriate consumer protection standards in the context of digital financial services adapting Know Your Customer (KYC) requirements based on the size, nature, and risks of customer transactions to address financial exclusion while mitigating the risks of money laundering and terrorist financing.
The regulation should be holistic and future proof. Holistically, it should include not only banks but also other players operating in the new disintermediated financial sector. Future risks are uncertain and the exponential nature of the new digital landscape requires us to develop a flexible regulatory framework.
Ensure stability and avoid the fragmentation of cyberspace: the other side of the coin of interconnectivity is cyber risks, which have many root causes (theft, terrorism, etc.). They not only create economic damage or geopolitical tensions. If there is lack of confidence in the safety and security of digital technologies, the adoption of new technologies will falter even if they offer substantial benefits. International cooperation among governments and private stakeholders is essential to effectively ensure security and safety in cyberspace while enhancing interoperability and manageability.
Digital technology innovation should pave the way to foster financial inclusion. Financial inclusion is about developing sustainable financial systems that offer all households and businesses access to a decent range of financial services. Advancing financial inclusion is among the top global economic concerns, as recognized by the German G20 Presidency and, for sure, will play a key role in the Argentinian G20 and the Indian G20. Therefore, it is of the utmost importance for the B20 to continue assisting G20 leaders in this endeavor.