Christine Lagarde, managing director of the International Monetary Fund, is pushing back at the characterisation of bankers as villains, pointing out that financial institutions help families buy homes and save for rainy days.
Referencing the 2018 sequel to the original P.L. Travers books, Lagarde said that this caricature of a bad banker reveals the attitude towards traditional financial services today, which has been prevalent since the global financial crisis.
However, while speaking at the 32nd World Traders’ Tacitus Lecture, Lagarde remained optimistic and used the UK as an example of how to ensure that the social impact of banking is put on a pedestal.
“The key to achieving this goal is to reshape finance into something that is more aligned with societal values and more connected to the interest of all stakeholders: from customers, to workers, to shareholders, to local communities and future generations.”
She highlights that this reshaping of finance also means that the system needs to be made safer with innovation, regulation and responsibility. While failing banks have been wound down and certain markets have been encouraged to become more transparent, the danger of “too-big-to-fail” banks also needs to be addressed.
Lagarde continued: “And even as policymakers are still internalising the lessons from the last crisis, they need to be vigilant about new risks. For example, the IMF has recently estimated that cyber-attacks could potentially lead to net income losses in the global banking system of up to $350 billion.”
In addition to this cost of doing business, Lagarde questioned how the financial sector can support long-term growth to ensure sustainability and inclusion. Here, fintech could provide an answer. “The fintech response is to increase competition, reduce inefficiencies, and provide better value for money to individuals and small businesses. In doing so, fintech can help drive an “inclusion revolution”.
1.5 million adults in the UK do not have a bank account, 33 million households in the US are under or unbanked and that figure is multiplied in emerging and developing countries. However, this is not a job for fintech alone, as Lagarde explains, and this is where women come in.
Lagarde said: “First, greater diversity always sharpens thinking, while reducing the potential for groupthink. And second, diversity also leads to more prudence and better decision-making,” and continued to say that “more female leadership is critical - and not just at the top, but as consumers of financial services. Women all over the world are making their voices increasingly heard when it comes to investing their own money.
“For example, recent surveys show that women are far more likely to engage in sustainable investing than men. And they are driving demand for new products, such as funds targeting gender equality in corporations.
“That spirit is beautifully captured by the “Fearless Girl” statue on Wall Street,” - a replica of the statue has in fact been installed by State Street in Paternoster Square in London, next to the London Stock Exchange.
Lagarde concluded with a final point on investing for the common good and addressing issues such as climate change and poverty, as per the UN’s Sustainable Development Goals. “Let me conclude by returning to Mary Poppins. Remember the scene where the “good banker” teaches his children a lesson about purpose.
“‘A British bank is run with precision. A British home requires nothing less! Tradition, discipline, and rules must be the tools. Without them - disorder! Chaos! Moral disintegration! In short, you have a ghastly mess!'
“Well, that is one way of putting it. But the question is whether young people today should consider joining the financial industry. For many of them, the answer comes down to finding a broader sense of purpose - much like Mary Poppins.
“The genius of her character is that she is serving others—with dignity, with a kind heart, with honesty, and with a wicked sense of humor. I think this is a good description of what the financial industry should be all about.
“Serving others, not yourself—that is the real magic of finance.”