WEBVTT - FDIC Walks Fine Line Between Regulation and Innovation 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penil podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:24.480 at Bloomberg dot com. I just had a great discussion 0:00:24.640 --> 0:00:27.080 with Elena McWilliams and chairman of the f d I 0:00:27.160 --> 0:00:29.880 see here at the Fintech conference. We spent an hour 0:00:29.920 --> 0:00:32.479 on stage talking about the f d i C and 0:00:32.720 --> 0:00:36.960 its role in managing the growth of technology within the 0:00:36.960 --> 0:00:40.559 financial services of business. Elena, thanks so much for joining us. 0:00:41.000 --> 0:00:42.400 You know, I think one of the big things we've 0:00:42.400 --> 0:00:45.199 talked about was, you know, certainly from your perspective, if 0:00:45.240 --> 0:00:47.440 the f d i C is trying to balance kind 0:00:47.440 --> 0:00:52.800 of the fostering innovation within the financial services industry through fintech, 0:00:53.080 --> 0:00:55.240 through crypto, all those cool things that we're reading about 0:00:55.240 --> 0:00:58.360 while at the same time protecting consumers, protecting the banks, 0:00:58.400 --> 0:01:01.880 protecting the system. Gives us how you walk that line. 0:01:02.520 --> 0:01:04.160 It's by the way, thank you for having me. It's 0:01:04.160 --> 0:01:06.800 a pleasure to be here today. It's a fine balance 0:01:06.920 --> 0:01:10.360 we have to strike as regular regulatory bodies in Washington. 0:01:10.800 --> 0:01:14.040 You want to encourage innovation, You want to encourage entrepreneurship 0:01:14.080 --> 0:01:17.120 with these banking entities because you want the banking activity 0:01:17.160 --> 0:01:20.520 to take place at the banks. And at the same time, 0:01:20.560 --> 0:01:24.000 if you overregulated, if you don't give banks certainty on 0:01:24.000 --> 0:01:27.200 how to innovate and engage with tech companies, the banking 0:01:27.240 --> 0:01:29.319 services and products are going to go outside of the 0:01:29.319 --> 0:01:32.160 banks and we will have a less of an ability 0:01:32.200 --> 0:01:36.120 to regulate them appropriately and provide for consumer protection if 0:01:36.160 --> 0:01:38.360 those things are done outside of the of the banking 0:01:38.520 --> 0:01:42.080 regulatory agencies sphere of influence and so there there's a 0:01:42.200 --> 0:01:45.080 there's a dual purpose here. One is you want banks 0:01:45.120 --> 0:01:47.720 to innovate because they have to stay competitive. Especially for 0:01:47.800 --> 0:01:51.440 small banks, they're suffering from the economies of scale, basically 0:01:51.520 --> 0:01:55.600 decimating their ability to attract new customers and grow UH 0:01:55.600 --> 0:01:59.480 and competely some of their much larger counterparties. And at 0:01:59.520 --> 0:02:01.840 the same time time you don't want so much activity 0:02:01.880 --> 0:02:05.720 to leave the banks that that you're increasing systemic risk 0:02:05.800 --> 0:02:09.560 outside of the banks and UH and unable to regulate 0:02:09.600 --> 0:02:12.280 it from a federal perspective, So it's a fine blunt balance. 0:02:12.360 --> 0:02:14.440 So which innovations are you talking about here? Is sort 0:02:14.440 --> 0:02:18.280 of online loans and sort of underwriting standards in that way? 0:02:18.600 --> 0:02:25.079 Is it uh bitcoin and cyber you know, different crypto assets? What? What? 0:02:25.240 --> 0:02:27.840 What innovations are sort of the most exciting and the 0:02:27.840 --> 0:02:30.640 most dangerous from your perspective. So among the most exciting 0:02:30.680 --> 0:02:33.720 are the ability of banks now to reach the unbanked 0:02:33.720 --> 0:02:36.799 and underbanked customers through some of the fintech companies and 0:02:36.840 --> 0:02:39.120 the channels that otherwise would not would not have been 0:02:39.120 --> 0:02:41.520 available to the banks or the customers. And so there's 0:02:41.520 --> 0:02:44.120 a potential for this new technology and and the banking 0:02:44.160 --> 0:02:47.119 services to be offered to millions of people that would 0:02:47.160 --> 0:02:49.440 have been left out of the banking system but for 0:02:49.440 --> 0:02:51.800 the fact that technology is now making the banking services 0:02:51.800 --> 0:02:54.440 and products accessible to them. On the other hand, you 0:02:54.520 --> 0:02:57.480 have to be careful about balancing the risk that some 0:02:57.560 --> 0:03:01.400 of these entities and products, including crypto uh assets and 0:03:01.440 --> 0:03:04.640 cryptox changes bring to the system. Where you want to 0:03:04.840 --> 0:03:07.120 you want to encourage innovation, but you don't want to 0:03:07.160 --> 0:03:09.560 introduce so much risk in the into the system that 0:03:09.680 --> 0:03:13.200 you're unable to understand how that risk will percolate throughout 0:03:13.200 --> 0:03:15.160 the system and what the end products will be for 0:03:15.160 --> 0:03:17.760 the customer and financial stability as well. So how does 0:03:17.800 --> 0:03:19.880 that come to the attention to the f d i C. 0:03:20.200 --> 0:03:23.560 Is it there's some group of cool kids from Silicon 0:03:23.639 --> 0:03:25.400 Valley come to Washington, d C. And say, Hey, we've 0:03:25.440 --> 0:03:27.800 got this new technology. We want to deploy it across 0:03:27.840 --> 0:03:30.560 the banking system. How does it come to the attention 0:03:30.800 --> 0:03:32.880 of the f d i C all this technological change, 0:03:32.880 --> 0:03:35.040 which it's a great question. Occasionally we do get folks 0:03:35.080 --> 0:03:37.920 in in hoodies and and the broken stocks showing up 0:03:37.920 --> 0:03:39.520 at the f d i C and and telling us 0:03:39.520 --> 0:03:42.240 about the new technology. Um. Most often the way it 0:03:42.280 --> 0:03:45.160 happens is that a bank will consider a partnership or 0:03:45.160 --> 0:03:47.800 teaming up with a tech company, or they have already 0:03:48.000 --> 0:03:49.960 done some partnering with a tech company, and they will 0:03:49.960 --> 0:03:51.600 come to us and say, exactly, how do you want 0:03:51.680 --> 0:03:55.080 us to position ourselves visa v this company? And how 0:03:55.120 --> 0:03:57.280 do you how are you going to regulate our relationship 0:03:57.320 --> 0:03:59.520 with that company. So then that's where the fda C 0:03:59.640 --> 0:04:01.880 steps in, and we want to understand how that the 0:04:01.960 --> 0:04:05.720 third party companies and technology companies in particular offer their 0:04:05.720 --> 0:04:08.120 products and services and how they're teaming up with these banks, 0:04:08.120 --> 0:04:10.680 and how banks are managing that risk. And in the end, 0:04:10.720 --> 0:04:12.920 we have to protect the deposit insurance system, and we 0:04:13.000 --> 0:04:15.120 have to protect consumers, and we have to make sure 0:04:15.160 --> 0:04:17.120 their safety and soundness in the system so that the 0:04:17.160 --> 0:04:19.720 system functions well. And so it's it's a it's a 0:04:19.720 --> 0:04:23.560 constant find balancing act that we do as a regulatory agency. 0:04:23.600 --> 0:04:26.320 When you're talking about catering to the unbanked, I'm thinking 0:04:26.360 --> 0:04:31.040 about alternative measures of whether somebody's going to repay their debt, 0:04:31.200 --> 0:04:34.560 right the idea of looking at say Facebook, or looking 0:04:34.560 --> 0:04:38.000 at their interactions elsewhere online and using that as sort 0:04:38.040 --> 0:04:40.440 of a metric to determine whether they're going to be 0:04:40.560 --> 0:04:44.720 credit worthy rather than just a FICO score. How much 0:04:44.800 --> 0:04:47.360 do you've used some of these measures as being insufficient 0:04:47.440 --> 0:04:51.760 and leading to people being getting loans that perhaps are 0:04:51.839 --> 0:04:55.120 not going to pay them back. It's it's it's always 0:04:55.120 --> 0:04:57.800 an issue whether people can repay their loan. If you're 0:04:58.040 --> 0:05:00.279 if you're getting into the alternative data and you don't 0:05:00.320 --> 0:05:03.559 have a good credit history behind this consumer traditional credit history. 0:05:03.720 --> 0:05:05.960 Having said that, we have We have talked to companies 0:05:05.960 --> 0:05:10.159 that have pretty strong algorithms to analyze the ability of 0:05:10.200 --> 0:05:13.119 these customers there that for which they're using alternative data 0:05:13.440 --> 0:05:16.840 to respond to their credit needs and how likely are 0:05:16.839 --> 0:05:19.640 they going to pay their bills? And so we're looking 0:05:19.680 --> 0:05:22.400 at that the technology here as a great equalizer or 0:05:22.440 --> 0:05:24.919 as in the past you wouldn't look at the alternative data. 0:05:25.040 --> 0:05:28.240 You would basically not considered a reputable enough data or 0:05:28.320 --> 0:05:31.360 not enough of a credit history per se to to 0:05:31.520 --> 0:05:34.520 uh to to substantiate somebody's ability to pay back the 0:05:34.560 --> 0:05:38.039 loan on its terms and and and conditions. Having said that, 0:05:38.080 --> 0:05:40.800 I think we're now venturing into territory where technology can 0:05:40.880 --> 0:05:43.360 bridge that gap and tell us how consumers are going 0:05:43.360 --> 0:05:46.160 to behave And so we're looking at alternative data at 0:05:46.160 --> 0:05:47.880 the m DA I see and making sure we understand 0:05:47.880 --> 0:05:49.760 to the extended banks are teaming up at companies a 0:05:49.800 --> 0:05:53.200 due alternative data lending, how how that's being done and 0:05:53.240 --> 0:05:55.360 what's the end outcome for the consumer as well as 0:05:55.360 --> 0:05:58.440 for the entities. Yelena McWilliams, thank you so much for 0:05:58.440 --> 0:06:00.240 being with us. Thank you the pleasure to be here today. 0:06:00.279 --> 0:06:03.000 Think about Eleni McWilliams is chair of the f d 0:06:03.120 --> 0:06:05.480 i C which is based in Washington, d C. But 0:06:05.560 --> 0:06:08.080 she is here with us at the Boston Fed for 0:06:08.120 --> 0:06:11.400 opening day of Boston Fintech Week nineteen, which is powered 0:06:11.800 --> 0:06:15.159 by Fintech Sam Box, after just having come off a 0:06:15.240 --> 0:06:19.599 panel which might comes, which survived, and evidently she is 0:06:19.600 --> 0:06:21.839 still speaking with him. This is good. I'm glad to 0:06:21.880 --> 0:06:39.480 see that. I'm very happy to say. I'm being joined 0:06:39.560 --> 0:06:42.279 right now by Brad Leavey. He is global head of 0:06:42.279 --> 0:06:45.479 Loans and Chief executive Officer of Market Serve, which is 0:06:45.520 --> 0:06:49.719 I h S Market UH and he normally is based 0:06:49.720 --> 0:06:51.679 in New York, but he's here with us on site. So, Brad, 0:06:51.920 --> 0:06:55.320 I want to get started with the concept of data 0:06:55.400 --> 0:06:59.840 and how that is becoming intricately connected with the modernization 0:07:00.080 --> 0:07:03.039 of markets. So when you're talking about your world, what 0:07:03.120 --> 0:07:07.000 does it mean to have data that gives you that 0:07:07.080 --> 0:07:10.920 kind of edge? Yeah, So in the loans market and 0:07:10.960 --> 0:07:15.040 the derivatives market, data is tremendously important, and not just data, 0:07:15.040 --> 0:07:17.600 but lots of different types of data, including what people 0:07:17.760 --> 0:07:21.000 term alternative data, which for me is just data that 0:07:21.240 --> 0:07:23.760 is not used in your traditional business day to day 0:07:23.800 --> 0:07:28.400 but may have some insights and be interesting. So, um, 0:07:28.440 --> 0:07:31.120 the data discussion is relative. It's relative to who you 0:07:31.160 --> 0:07:33.600 are and what you're doing. It's relative over time, and 0:07:33.680 --> 0:07:37.880 more importantly, it's dynamic over time where data sets combine 0:07:37.920 --> 0:07:40.880 and create additional data sets on top of the fact 0:07:40.960 --> 0:07:44.640 that you're consuming either base data or alternative data, and 0:07:44.640 --> 0:07:48.200 then the combinations of those alternative data. Are you talking 0:07:48.200 --> 0:07:50.680 about yelp reviews and things like that, and you know, 0:07:51.000 --> 0:07:53.400 is that sort of the concept here? I mean, Yelp 0:07:53.400 --> 0:07:56.080 reviews could be a form of alternative data for sentiment 0:07:56.240 --> 0:07:58.880 on some consumer product, but to an equities trade or 0:07:58.920 --> 0:08:02.920 credit the false swap might be as far as alternative data, 0:08:02.960 --> 0:08:05.920 because an equity trader typically will not be looking at 0:08:06.240 --> 0:08:08.520 credit derivative day to day to day. So it's i'd 0:08:08.520 --> 0:08:11.040 say it's on the edge of what is alternative data 0:08:11.120 --> 0:08:14.120 to that particular instrument trading day to day. Are you 0:08:14.160 --> 0:08:16.679 trying to create data feeds that can then go into 0:08:16.720 --> 0:08:20.200 different algorithms that can then basically be streamed different traders, 0:08:20.640 --> 0:08:23.720 uh and and sort of submitted into their models. Is 0:08:23.720 --> 0:08:25.920 that the idea here? Yeah, So ultimately all data will 0:08:25.920 --> 0:08:27.800 be in feed form. A lot of data today is 0:08:27.920 --> 0:08:29.920 used in terms of people looking at it in action, 0:08:30.200 --> 0:08:33.120 but over time all data will become more digitized or 0:08:33.120 --> 0:08:36.200 more accessible via feeds. When that happens, there's a lot 0:08:36.240 --> 0:08:38.480 of analytics that you can run at the time you're 0:08:38.520 --> 0:08:43.240 consuming that data or after or before UH. Over time, 0:08:43.760 --> 0:08:46.480 those the modernization of the data through feeds allows you 0:08:46.520 --> 0:08:49.000 to do a lot more with it and then action 0:08:49.080 --> 0:08:51.240 that UH that insight that you may be gleaning from 0:08:51.320 --> 0:08:53.640 multiple streams of data, So it's not just one stream 0:08:53.679 --> 0:08:56.480 of data being digitized and the feed it's many streams 0:08:56.480 --> 0:08:59.880 of data being digitized, robust analytics being created around it, 0:09:00.040 --> 0:09:02.400 an insight that you can then action that may result 0:09:02.440 --> 0:09:05.640 in inequity trade you're shutting down a power plant or 0:09:05.679 --> 0:09:07.520 getting into a risk position that you didn't want to 0:09:07.520 --> 0:09:09.560 be in the day before. So then how are people 0:09:09.720 --> 0:09:12.920 using these different feeds and sort of synthesizing them. How 0:09:12.960 --> 0:09:15.680 do they know how to wait all of the different 0:09:15.720 --> 0:09:19.920 points and bring them together. Well, I guess you don't 0:09:20.880 --> 0:09:24.720 UH at any given time, and it's relative over time. 0:09:25.000 --> 0:09:27.880 So today there may be a certain point of data 0:09:27.920 --> 0:09:30.440 that is not interesting at all tomorrow because it's an 0:09:30.440 --> 0:09:32.319 event in the market that could be the most important 0:09:32.320 --> 0:09:34.800 information that you want to get to. So I do 0:09:34.880 --> 0:09:38.280 think there's an element of data both changes over time. 0:09:38.559 --> 0:09:42.800 What is commoditized today, alternative today is commoditized tomorrow. But 0:09:42.920 --> 0:09:45.760 also the macro backdrop of what is going on in 0:09:45.760 --> 0:09:49.480 the world may drive importance of data. And as we 0:09:49.559 --> 0:09:52.720 moved to cloud, as we modernize, as we digitize, as 0:09:52.720 --> 0:09:55.800 sensors proliferate on every device and every person and everything, 0:09:56.280 --> 0:09:58.040 you're going to have a huge amount of data that 0:09:58.160 --> 0:10:01.880 is fed, analyzed, and action. We are in inning three 0:10:02.440 --> 0:10:06.000 of probably a triple header in the modernization of data 0:10:06.040 --> 0:10:09.000 in the world, including the financial services system. It's it's 0:10:09.040 --> 0:10:11.640 I'm smiling because I'm thinking about an article I once 0:10:11.679 --> 0:10:14.080 write about how the US government collects a lot of 0:10:14.080 --> 0:10:16.680 information and a lot of it could be completely useless, 0:10:16.679 --> 0:10:19.640 but with the AI that they sort of overlay on 0:10:19.760 --> 0:10:22.199 top of it, they can discover things. And that's a 0:10:22.240 --> 0:10:24.559 lot of how the big discoveries have been made, and 0:10:24.600 --> 0:10:26.880 they've been made by accident. I want to shoo gears 0:10:26.880 --> 0:10:29.199 a little bit, because you do tabulate all of these 0:10:29.280 --> 0:10:32.800 data points, and you do have access to so many things. 0:10:33.360 --> 0:10:36.480 Do you have a sense of where credit quality is 0:10:36.559 --> 0:10:41.000 kind of leaning these days. Well, I look at the 0:10:41.040 --> 0:10:44.760 markets as a forty year bowl market in rates going down, 0:10:45.000 --> 0:10:47.560 and I would estimate a twenty year bowl market and 0:10:47.559 --> 0:10:49.960 credit going up. We did have an interruption in the 0:10:49.960 --> 0:10:53.079 credit going up seven, eight and nine, or really O 0:10:53.160 --> 0:10:56.720 eight in line um, but it really wasn't a credit event, 0:10:56.800 --> 0:10:59.439 as it was a market event. In my view. It 0:10:59.559 --> 0:11:03.880 definitely manifested around credit, but the reality was there wasn't 0:11:03.880 --> 0:11:07.000 a huge wash out with the exception of several institutions 0:11:07.000 --> 0:11:11.320 in the financial services world. But in terms of a 0:11:11.360 --> 0:11:14.319 major credit event for the world, it felt like that, 0:11:14.400 --> 0:11:17.000 and it seemed to move on within a couple of years. 0:11:17.480 --> 0:11:19.400 I would argue that since the late nineties were in 0:11:19.400 --> 0:11:22.800 that credit boom, and over time things get looser and 0:11:23.000 --> 0:11:26.080 cycles turn, everybody's trying to predict the turn of the 0:11:26.080 --> 0:11:31.360 credit cycle somewhat pinto a recession or some other geopolitical thing. Uh. 0:11:31.440 --> 0:11:33.400 I'm not trying to time anything like that, but I 0:11:33.440 --> 0:11:36.040 do think it's a bit long. I'm not sure things 0:11:36.080 --> 0:11:39.680 are loose as much as there's a lot of financing available, 0:11:40.600 --> 0:11:44.199 and over time those things tend to turn. The question 0:11:44.240 --> 0:11:47.600 will be will it turn gradually or will it turn Uh? 0:11:48.240 --> 0:11:50.360 In a volatile way, or will it be multiple volatile 0:11:50.360 --> 0:11:52.360 turns that will add up over time to a credit event. 0:11:52.880 --> 0:11:55.320 If you don't think that two thousand and eight and 0:11:55.360 --> 0:11:59.600 two thousand nine was a major credit event, what would 0:11:59.600 --> 0:12:02.320 a made or credit event look like. I think it 0:12:02.440 --> 0:12:04.960 was an event in trust in the markets, which is 0:12:04.960 --> 0:12:08.520 the broader concept of credit, maybe, but an actual credit 0:12:08.559 --> 0:12:11.880 event that drives a lot of defaults beyond just a 0:12:12.000 --> 0:12:15.360 few markets in housing, in other areas where they truly 0:12:15.400 --> 0:12:18.720 were major credit events in that market, but in the 0:12:18.800 --> 0:12:21.600 loans market and leverage finance, and the corporate bond markets 0:12:21.640 --> 0:12:25.120 and the student loan markets and consumer credit generally, things 0:12:25.200 --> 0:12:29.200 did get tight. But I personally my view, I don't 0:12:29.200 --> 0:12:31.360 think it was the credit event that had I wash 0:12:31.440 --> 0:12:34.160 out and a reset like the late eighties, for example, 0:12:34.480 --> 0:12:37.360 which we could still experience at some point. Again, in 0:12:37.400 --> 0:12:39.640 the world of physics and chemistry, you would argue that 0:12:39.760 --> 0:12:42.240 things go up and then do come down, and that 0:12:42.320 --> 0:12:46.760 different combinations of elements with physics drives dynamic outcomes and 0:12:46.760 --> 0:12:49.240 that's why it's so hard to protect. Just real quick here, 0:12:49.559 --> 0:12:52.080 we've been talking a lot about financial technologies here at 0:12:52.120 --> 0:12:54.480 the Fintech conference and I guess h when we talk 0:12:54.520 --> 0:12:56.720 about leverage loons, I don't think about a market that's 0:12:56.720 --> 0:13:00.280 particularly advanced technologically. Where are we in terms of moving 0:13:00.280 --> 0:13:03.680 away from fax machines into the modern area there? Yes, 0:13:03.720 --> 0:13:06.040 so there is no doubt that the loans market and 0:13:06.120 --> 0:13:09.720 all markets need an amount of digitization and modernization. UH. 0:13:09.720 --> 0:13:12.840 There are some faxes in the industry that are utilized 0:13:12.880 --> 0:13:16.679 to distribute information around. That's been going on for thirty years. UH. 0:13:16.679 --> 0:13:19.400 In the last several years, we've moved dramatically away from 0:13:19.400 --> 0:13:22.920 faxes into proprietary feeds or more structured feeds that are 0:13:22.920 --> 0:13:27.239 not facts based. But I would argue that there's many 0:13:27.280 --> 0:13:30.280 elements that need to modernize in the loan markets, whether 0:13:30.280 --> 0:13:35.200 it's the documents themselves, facts is being utilized, more direct connectivity, 0:13:35.600 --> 0:13:40.200 it's an heavier asset class that isn't um as digitized. 0:13:40.920 --> 0:13:43.080 But there have been major advances in the last five 0:13:43.160 --> 0:13:46.160 or ten years on incremental digitization that have taken some 0:13:46.200 --> 0:13:48.880 faxes out of our life, have moved more automations from 0:13:48.880 --> 0:13:52.520 documents to a feed. More importantly, have combined many processes 0:13:52.800 --> 0:13:55.760 to take settlement times down from something that may have 0:13:55.760 --> 0:13:57.680 been in the mid twenties to be honest, in terms 0:13:57.679 --> 0:14:01.960 of days and parlans in the US down plus percent 0:14:02.000 --> 0:14:04.240 in the last couple of years, so we've made a 0:14:04.280 --> 0:14:06.680 lot of progress, post Dodd, Frank brad Levy, thank you 0:14:06.720 --> 0:14:08.560 so much for being with it with me today. Brad 0:14:08.640 --> 0:14:10.880 Levy is a global head of loans and chief executive 0:14:10.920 --> 0:14:31.840 Officer of Market Serve of I h S. Market Today. 0:14:31.920 --> 0:14:34.360 We are so lucky to have Dr ellen Wald, President 0:14:34.400 --> 0:14:37.880 of Transversal Consulting. She does contribute also Bloomberg opinion columns. 0:14:38.240 --> 0:14:40.840 Uh and Ellen, you know, I want to start with 0:14:40.880 --> 0:14:45.000 this news that uh, well really frankly, that Saudi a 0:14:45.080 --> 0:14:48.960 Ramco is looking at the richest people in Saudi Arabia 0:14:49.040 --> 0:14:52.840 to basically provide a lynch pin of financing for its 0:14:52.880 --> 0:14:55.240 initial public offering. There seems to be a spate of 0:14:55.320 --> 0:14:59.560 news about this i P. Are we getting closer now, well, 0:14:59.640 --> 0:15:01.840 don't say that we're getting closer. And this is really 0:15:02.440 --> 0:15:07.360 a bombshell of an announcement. Um this report that um 0:15:07.400 --> 0:15:10.960 that Saudi Arabia is looking for rich families essentially in 0:15:11.040 --> 0:15:15.080 the Kingdom to buy into this i P O either 0:15:15.160 --> 0:15:18.600 before or even even possibly after, but probably before it 0:15:18.640 --> 0:15:22.600 goes on on the local Saudi exchange and UM, what's 0:15:22.680 --> 0:15:24.960 what's really intriguing about the report is that some of 0:15:25.200 --> 0:15:29.200 these UM families, in these family businesses, had individuals who 0:15:29.200 --> 0:15:33.040 were arrested and held in the ritz UH in ri 0:15:33.160 --> 0:15:36.360 odd just just they think a few years ago. So 0:15:36.640 --> 0:15:39.440 they say that they're not being pressured. But UM, in 0:15:39.480 --> 0:15:42.480 a country where UM the government is an absolute monarchy, 0:15:42.520 --> 0:15:45.880 can you really say that there's no no pressure there? 0:15:46.440 --> 0:15:49.160 And UH, it would seem to be a sign at 0:15:49.240 --> 0:15:52.880 least to me that international UH, any regulator for an 0:15:52.920 --> 0:15:55.800 international exchange needs to pay very close attention to this, 0:15:56.160 --> 0:16:00.840 because UM international exchange should not be party to anyone 0:16:00.960 --> 0:16:04.800 being coerced in any way to invest. This does seem 0:16:04.880 --> 0:16:08.320 to be a potentially an attempt to maybe artificially prop 0:16:08.400 --> 0:16:11.160 up prices, and we do know that the Saudi's have 0:16:11.800 --> 0:16:16.040 definitely tried to prop up their exchange at certain times. 0:16:16.200 --> 0:16:18.280 I would certainly say that a regulator should be very 0:16:18.320 --> 0:16:21.280 wary of allowing a listing of a business that engages 0:16:21.360 --> 0:16:25.840 in UM kind of a coercive type practices. So you 0:16:25.920 --> 0:16:29.160 raise a really interesting point, which is that it would 0:16:29.200 --> 0:16:33.400 seem that Saudi Arabia engages in practices that don't seem 0:16:33.400 --> 0:16:39.360 necessarily consistent with publicly traded exchanges in developed markets, which 0:16:39.440 --> 0:16:43.560 raises a question would any exchange actually push back on 0:16:43.800 --> 0:16:46.360 Saudi Aramical IPO given the fact that it's a huge 0:16:46.440 --> 0:16:49.360 boon to them to get it listed on their exchange, 0:16:50.400 --> 0:16:52.960 And this is an issue and we do we have 0:16:53.040 --> 0:16:57.120 seen report. We do have reports that UM managers and 0:16:57.680 --> 0:17:00.240 funds in Saudi Arabia have been pressured to buy at 0:17:00.280 --> 0:17:03.640 times to help lift the to double the Saudi exchange. 0:17:03.640 --> 0:17:05.959 So so we do have have some evidence that this 0:17:06.480 --> 0:17:08.920 has occurred in the past, So don't not the only exchange. 0:17:08.920 --> 0:17:12.520 We We've also gotten similar reports from China as well. 0:17:12.640 --> 0:17:16.000 So it really begs the question of whether New York 0:17:16.000 --> 0:17:20.440 Stock Exchange or London Stock Exchange can really legitimately list 0:17:20.480 --> 0:17:24.120 Saudia opponent. It seems almost that UM the Saudis are 0:17:24.200 --> 0:17:28.879 realizing that perhaps a big exchange like New York or 0:17:28.920 --> 0:17:31.400 London is really not the place for them. We do 0:17:31.480 --> 0:17:34.880 now see that they're potentially turning to Tokyo. But this 0:17:34.960 --> 0:17:37.919 issue of where to list and can they list, and 0:17:37.960 --> 0:17:41.879 are they willing to let go of the power that 0:17:41.960 --> 0:17:44.080 they want to have in order to get a listing 0:17:44.480 --> 0:17:47.840 on New York or London. It really seems like perhaps 0:17:47.880 --> 0:17:50.400 this is not meant to be. Yeah, well, and there 0:17:50.400 --> 0:17:52.280 have been a lot of signs of that over time. 0:17:52.480 --> 0:17:55.000 One of them has been the drop in oil prices 0:17:55.040 --> 0:17:58.480 and sort of leads to another development overnight that came out, 0:17:58.520 --> 0:18:03.840 which is that Saudia Saudi Energy Minister uh Prince Abdulaziz 0:18:03.920 --> 0:18:07.879 bin Salmon, he is the new Saudi energy minister. The 0:18:07.920 --> 0:18:11.520 other one was basically pushed out. Can you give us 0:18:11.640 --> 0:18:15.320 some context to this? Well, I wouldn't. I would be 0:18:15.359 --> 0:18:17.320 hesitant to say that he was pushed out. We don't 0:18:17.359 --> 0:18:21.399 really know the reason why um Folly is no longer 0:18:21.440 --> 0:18:24.000 than energy minister either. He could have been pushed out. 0:18:24.119 --> 0:18:27.160 He may have desired to step down at this point 0:18:27.240 --> 0:18:30.320 given what's been going on. So just because we don't 0:18:30.320 --> 0:18:33.240 know for sure what went down there, UM the way 0:18:33.240 --> 0:18:35.119 that they do this inside way was they just issue 0:18:35.119 --> 0:18:38.160 a decree. So it might look like he's been ousted, 0:18:38.240 --> 0:18:40.679 but we we don't really know the details there. But 0:18:40.760 --> 0:18:44.760 it does seem that UM the Saudis were potentially moving 0:18:44.760 --> 0:18:47.960 in this direction. They did remove all Folly as chairman 0:18:48.119 --> 0:18:51.560 of the board of Saudi Aramco and they did um 0:18:51.800 --> 0:18:54.840 divide the Ministry of used to be the Ministry of Energy, 0:18:54.880 --> 0:18:58.280 Industry and Economy just before this, so um it does 0:18:58.359 --> 0:19:01.480 seem like they were making changes in this area. One 0:19:01.480 --> 0:19:04.040 of the reasons I've I've heard is that they want 0:19:04.119 --> 0:19:07.760 to make more of a separation between the oil company 0:19:07.840 --> 0:19:11.440 and the ministry before uh they move on and move 0:19:11.480 --> 0:19:14.040 forward with this i p O. But people have also 0:19:14.080 --> 0:19:16.200 said that, you know, there's a problem with oil prices, 0:19:16.600 --> 0:19:19.040 there's been problems with this i p O. It would 0:19:19.040 --> 0:19:21.199 seem to me that Holida Folly is not to be 0:19:21.240 --> 0:19:23.680 blamed for this. This is an oil market that's been 0:19:23.840 --> 0:19:29.680 ruled by speculation over demand, weakening demand, global economic data 0:19:29.720 --> 0:19:32.520 that is not positive, and the US China trade talks, 0:19:32.560 --> 0:19:35.239 and we look at oil climbing today. Well, there are 0:19:35.240 --> 0:19:36.800 a lot of reasons for it, but one of them 0:19:36.880 --> 0:19:39.720 is that there's some good news on the U S 0:19:39.840 --> 0:19:42.480 China trade talks that they're setting talks for October. So 0:19:42.520 --> 0:19:45.520 I wouldn't be surprised if oil is rising more as 0:19:45.520 --> 0:19:47.639 a result of this than the result of anything that 0:19:47.680 --> 0:19:51.200 Saudi Arabia is saying or doing. It's really good perspective 0:19:51.280 --> 0:19:53.359 on especially because I'm looking at the wording of a 0:19:53.359 --> 0:19:56.240 lot of the stories and it's that that King Salmon 0:19:56.560 --> 0:20:00.600 dismissed the former energy minister and put in uh, this 0:20:01.119 --> 0:20:03.840 heir to the throne. So I mean, I think that 0:20:03.920 --> 0:20:05.879 I think it's important to be cautious about that and 0:20:05.880 --> 0:20:08.080 basically say, we don't know what happened, we don't know 0:20:08.119 --> 0:20:10.280 what the implications are, and that the price moves that 0:20:10.320 --> 0:20:13.040 we're seeing today are not necessarily reflective of this change. 0:20:13.200 --> 0:20:15.919 Dr ellen Wald, thank you again for being with us, 0:20:15.960 --> 0:20:19.960 President of Transversal Consulting. She's also a nonresident Senior Fellow 0:20:20.000 --> 0:20:23.359 at the Atlantic Council's Global Energy Center and a Bloomberg 0:20:23.440 --> 0:20:43.439 Opinion contributor. We are broadcasting live from Fintech Week. We 0:20:43.480 --> 0:20:47.320 are currently in Boston at the Boston Federal Reserve. It 0:20:47.400 --> 0:20:51.879 is being hosted powered by the Fintech Sandbox, and I 0:20:51.920 --> 0:20:54.399 am so happy to say we have with us Dadine Shikar, 0:20:54.560 --> 0:20:57.560 she has head of Global Markets for State Street. Here 0:20:57.600 --> 0:20:59.399 on site. We are going to be doing a panel 0:20:59.440 --> 0:21:03.800 together about human versus Machine in this evolving era of 0:21:03.920 --> 0:21:07.520 technologically fueled markets. And I was left with the question 0:21:07.560 --> 0:21:10.399 when I was really looking into this. Do humans matter 0:21:10.440 --> 0:21:14.200 in public markets anymore? Ultimately, well, machines, what the algorithms? 0:21:14.240 --> 0:21:17.199 Will the artificial intelligence sort of take over when it 0:21:17.240 --> 0:21:20.400 comes to decision making? First of all, good morning and Lisa, 0:21:20.440 --> 0:21:22.840 and thank you for having us to answer your question. 0:21:22.880 --> 0:21:25.360 I think there's always going to be a role for humans, 0:21:26.040 --> 0:21:28.520 uh in the process. And um, you know, when I 0:21:28.560 --> 0:21:31.160 was preparing for this panel, I'm not creature. It's really 0:21:31.240 --> 0:21:38.840 man versus machine. Oh come on, but it's it's it's 0:21:38.880 --> 0:21:41.440 really gonna be. I think it's man plus machine because 0:21:41.440 --> 0:21:45.200 they compliment each other a lot better. Maybe beyond our 0:21:45.240 --> 0:21:48.840 combined lifetime, well we'll see humans being sidelined. But right now, 0:21:48.960 --> 0:21:52.040