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The Purpose, Mandate and Contribution of the Financial Sector

The Purpose, Mandate and Contribution of the Financial Sector

In January 2017 Socires hosted a seminar titled Reconnecting Finance with Society. Researchers, finance professionals and policy makers came together to discuss three approaches to make this happen:

  1. Changing the regulatory framework for financial institutions
  2. Finance for societal impact
  3. Embedding transactions in relationships

 

Two videos of talks given at this meeting were already published on this blog:

 

Main findings of the seminar in January 2017 were the following:

  • We need to go back from transactions to more human relationships involving specific investments in getting to know, trust and appreciate each other. This leads to better risk sharing and more stability. This means that we have to have the courage to have faith in people and accept more risk by giving out of our hands the control that we cherish. Changes like this, cultural changes, will take a lot of time, but there is no alternative because the current model, based on fear, skepticism and selfishness, will ultimately bring us nowhere.
  • Banks are engaging in a renewal of culture, towards a culture in which people put dilemmas on the table and are open to discuss them. That is behind the bankers’ oath in the Netherlands. There is the journey towards the moment of taking the oath, discussing and reflecting on what it means to have such a culture, and afterwards maintaining that culture in which people feel individually and collectively responsible for preserving the values of their institution and for adding value to human flourishing, the natural environment and society as a whole.
  • Next to regulation and control, regulators and society should engage in a dialogue with the sector on the purpose, mandate and contribution of the financial sector. Establish a relationship based on a shared understanding on the specific mandate as a sector and how regulator and bankers each deliver their contribution to this ideal. Idealistic regulation.
  • Finance is about human relationships, sure, but how does this knowledge go from the head into the hearts of the people? Different levels of change and transformation; taking into account the complexity of the human being, a rational and an emotional being with his desires, anxieties and frustrations.
  • Tax advantages for debt should be scrapped, because they have negative externalities and also negative internalities – on human beings as well as organizations and society as a whole.
  • Tax evasion constructions and exorbitant pay gaps are societal and organizational trust killers.

Read a more extensive report of the meeting at the Socires website

A follow-up meeting that Socires organizes on 9 June 2017 will dive deeper in the recent Dutch report by the Scientific Council for the Government (Dutch: WRR), with the title Samenleving en Financiële Sector in Evenwicht (Society and the Financial Sector in Balance).

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