Why is Finance Not Just About Greed and Arrogance?

Speaker:

Verena Romero Frychel

Verena Romero Frychel is an Investment Director. She sources, analyzes and executes investments in Private Debt.
WikiStage ESCP Europe 8 - Paris
Event:

WikiStage ESCP Europe 8 - Paris

Paris, France. 2016

Finance has been called destructive. Evil, even - Can Finance make our world a better place?

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WikiStage ESCP Europe, Paris campus
www.wikistage.org

“Can you actually say that the financial industry is broken, evil or destructive? Can you say that debt is necessarily a bad thing?”

“Financing is a very important factor for a strategy of growth.”

“I had the opportunity to manage a family business in Mexico. Mexico has a huge problem, because the economy is lacking access to finance sources, so small and medium sized companies do not have access to financing sources. (…) If these companies do not have sufficient financing, most of them will stay small, regional without possibilities to expand.”

“Lack of financing hurts the economy.”

“However, too much debt is also bad for the economy. There are some signs right now that there is a real estate bubble forming up in China which might explode and there is a huge amount of student loans outstanding in the United States.”

“Even today in 2016 banks are still struggling with capital requirements, reduced balance sheets and increased regulatory burden, so they are not lending.”

“Quantitative easing (printing money to buy back debt) has not reached the small and medium sized companies”

“Institutional investors have to put their money somewhere because one day they need to pay for your retirement. Scarcity of bank lending, changing regulation and investors’ need for yield has led to the disintermediation of the finance sector and alternative lenders have been growing and trying to fill this lending gap.”

“True, there have been excesses in finance. There have been false incentives in some cases, there have been bad people. But bad people exist everywhere, in every industry – look at Enron, FIFA or Volkswagen.”

“If all firms have access to financing in different stages of their lifecycle, in different forms and in a measured way – this will lead to more professionalized firms, better reporting structures, more transparency and that will lead to growth and economic prosperity.”