I/ – When we look at the economic and financial environment today, we can see that it is characterised by five paradoxes 1/ – First paradox: we have carried out a lot of reforms, but the flow of credit, at least of bank credit, to the economy is still insufficient. After three years of intense efforts, the main international regulatory bodies – the Basel Committee, FSB, and G20 – have achieved impressive results. We have significantly reinforced financial regulation, tightened capital and liquidity requirements, built more robust and efficient banks with healthier and more solid balance sheets. But despite this, bank lending remains sluggish. At the same time, bond issues have shot up, including those by less creditworthy borrowers, while issuance conditions have become less and less rigorous. The main losers in this two-pronged scenario are SMEs. 2/ – Second paradox: the economy is struggling but stock markets are soaring. As you know, although many countries are now seeing a marked recovery, the overall pace of growth remains disappointing. Recent figures for the US are below expectations. There’s still some uncertainty over Chinese growth. And the euro area is struggling to get off the ground. Despite this, the main stock market indices have risen by around 50% in the past two years. For many, this contradiction serves to confirm the idea that finance exists within a world of its own and is disconnected from the “real” economy. 3/ – Third paradox: we have made the banks “secure”, but financial risks are appearing in other areas.
Christian Noyer: Is speculation the enemy of investment? Speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, Aix-en-Provence Economic Forum, Aix-en-Provence, 5 July 2014. *  *  *  Between paradox and illusion: a narrow path for finance Seven years after the start of the crisis, the French public – and they are not alone in this – remain largely hostile to the world of finance. Despite huge efforts at reform, there are still doubts hanging over the sector. Is finance useful for the economy? Or, in its current form, is it merely a tool for ever-increasing speculation, at the expense of investment and the longterm needs of the economy? The fact that we still need to ask this question shows that we are living in difficult and paradoxical times, where the inner workings of the economy are often a mystery. In this context, it is tempting to fall back on simple solutions; but that would be dangerous, and I will try to sketch out, in just a few minutes, what I believe would be a good middle ground between an unconditional love for and an exaggerated hatred of financial activity.