Global Banking's Bumpy Road
Scotiabank’s Mike Durland on the prospects for greater regulation of world financial markets and the challenges facing financial innovators
Mike Durland is Group Head and Co-CEO, Global Banking and Markets, of Scotiabank. Durland earned his PhD in Finance at Queen’s School of Business and sits on QSB’s Advisory Board.
In conversation with QSB Insight, he discusses the evolution of global banking, the dynamics of financial innovation and greater regulation, the positioning of Canadian banks in global markets, the ebb and flow of financial globalization, and the promise of behavioural finance.
Video Highlights
0:15 On the importance — and limits — of financial innovation:
The modern age of finance was ushered in during the mid-1980s, with new financial instruments such as derivatives and the influx of young professionals with sophisticated math skills and financial theories. These professionals were pioneers. “Sometimes pioneers get the big picture right and the little picture wrong. . . Every time there was a new innovation, within a relatively short period of time there was a bubble or a crisis. . . It’s important that we innovate but it’s also important for all members of the industry that they respect the implications of the things they innovate.”
5:19 On the prospects for tougher regulation of financial markets:
“My sense is that the regulators are being responsible . . . and aware of the importance of providing guidance to financial institutions and to consumers of financial products. We should expect five to 10 years for regulation to be an evolving matter. . . In Canada, we don’t believe our business model will be materially impacted by any of the regulations.” Durland says greater global regulation is “pulling down the risk meter” to where Canada’s more conservative banks are more comfortable, making them better positioned for global competition.
8:36 On whether financial globalization is on the retreat:
“When you get the economic superpowers having to take care of business at home, it’s quite natural to think that globalization takes a slightly different priority. Is it a long term trend? I don’t think so. Globalization has been deflected from its trajectory temporarily. . . That could last for half a decade. And you might see a Western Hemisphere versus Eastern Hemisphere rivalry start to emerge.”
10:40 On his interest in behavioural finance:
“As I’ve been around the business and watched how people behave in trade floor situations, boardrooms, how competition behaves, how markets perform in the face of bad news or good news, I’ve grown to believe that human behaviour has a lot to say about how markets behave. Even today, that’s not a popular sentiment among academics because it makes the theory more complex. But I’m fascinated by it.”
12:45 On what keeps him up at night:
“How central banks unwind stimulus is very important. I relate it to scuba diving; there are going to have to be some safety stops along the way as we ascend. It’s uncharted territory. We don’t have a playbook for this.”
— Interview by Alan Morantz