Deloitte Global Chair Sharon Thorne @Lujiazui Forum
Our highest priority: Maintaining the veracity of capital markets through quality and integrity
With “Shanghai International Financial Center 2020: New Starting Point, New Mission, New Vision” as its theme, the 12th Lujiazui Forum 2020 was successfully concluded on June 19 in Shanghai. Vice Premier Liu He sent written opening remarks to the forum. The Governor of the People's Bank of China, Yi Gang, the Chairman of the China Banking and Insurance Regulatory Commission, Guo Shuqing, and the Chairman of the China Securities Regulatory Commission Yi Huiman delivered keynote speeches to the forum. Deloitte Global Chair Sharon Thorne was invited to be a panelist on the Plenary Session: Judicial Environment for Finance and International Financial Center Development.
Read the highlights of Sharon's panel contribution below.
I am delighted to accept the Mayor’s invitation to become a member of the Shanghai International Financial Advisory Council, and very honored to be here today – thank you for inviting me to speak. A great deal is going on in the world at the moment – many uncertainties and many new and fast-moving challenges and changes. The current global health and economic crises have been consuming much of our attention recently and can sometimes feel overwhelming … but if we take a moment and zoom out a bit – the global economy and financial systems have weathered many shocks over the decades, and there will be others in the future. Investing in strengthening the financial regulatory environment is one of the ways we can bring stability and transparency to our economies – it is essential for navigating crises successfully, as well as ensuring long term resilience and sustainability. It is essential for international financial centers to have strong underlying foundations upon which to build. Key areas of competitiveness for IFCs include human capital, infrastructure, financial sector development, reputation and business environment – which includes having a strong institutional, judicial and regulatory environment.
What does a strong regulatory environment look like and why does it matter for IFC development?
IFCs make significant contributions to host economies through direct and indirect value creation, and promote the development of inclusive economies and societies by increasing business and spreading wealth among citizens. Developing an IFC requires mutual respect and understanding between the host economy and businesses wishing to participate – when establishing themselves within an IFC, companies need to demonstrate long term commitment and investment, a willingness to abide by the local rule of law, and – increasingly – they need to engage with society, demonstrating their value beyond wealth creation. An international financial center should boast professionalism, the adoption of technology, and a global outlook. To achieve this, the regulatory and judicial environment is critical. It needs to enable trust, create transparency and promote financial inclusion. Trust in business is very important – it’s good for the economy and good for wider society. Companies benefit from the ‘halo effect’ of operating in an environment with strong regulation, and are likely to be viewed as more reliable and trustworthy. There is also evidence that well-regulated companies enjoy lower funding costs as they are seen as more credit-worthy and stable by credit rating agencies. The many stakeholders within an FRE are interconnected and interdependent – companies, boards, regulators, auditors, investors, standard setters, audit committees – none of these stakeholders can single-handedly enhance or strengthen the ecosystem. It takes all of them – all of us – working constructively together. A strong regulatory system is predictable, transparent and rules-based, offering companies the certainty they need to invest for the long term and giving them confidence that any regulatory disputes will be handled in a fair and impartial manner. Put simply, do the systems reflect, support, and enable the purpose and vision of creating a value-generating, sustainable IFC? It’s more efficient to consider these questions early in a venture and learn from those who have gone before. It is also important to give careful consideration to how the financial reporting ecosystem functions – how can it function better? – and to think about what each of the stakeholders needs to do to achieve extraordinary results for society.
Fostering the development of an IFC within an economy is far from easy – those that are successful promote a pro-business culture, design in flexibility and market responsiveness, while balancing the absolute need to maintain stability and insure against systemic risk. Shanghai is on an incredible journey of growth and development. Forty years ago, it would have been impossible to picture the Shanghai we find ourselves in today – and we can only imagine how things will look 40 years from now. Around us, the world is experiencing some major shifts – from cloud to climate – none of us truly knows what the future will hold. However, Shanghai has a unique opportunity as a global financial center in a country that leads the world in technology, to develop the world's leading regulatory and supervisory technology infrastructure that gives transparency and confidence to market participants. I’m proud to be here today as an expression of Deloitte’s deep commitment to doing its part – to serving the public interest and helping maintain the veracity of capital markets through quality and integrity. It’s our highest priority.