We’re excited to share a special episode in partnership with our colleagues in the San Francisco Fed’s Community Development group. Our teams recently collaborated on a special issue of the Community Development Innovation Review in partnership with the Aspen Institute’s Financial Security program, which examined the potential ways financial technology can promote racial equity in the financial system. Today’s episode is a corollary to our recently concluded Financial Inclusion &amp; Beyond series where we explored what we can learn from efforts around the world to improve financial inclusion and wellbeing. The event included a fireside chat with San Francisco Fed President Mary Daly and Ida Rademacher, Executive Director of the Aspen Institute’s Financial Security Program, and a panel discussion with several journal contributors moderated by Rocio Sanchez-Moyano, a senior researcher in the Community Development  group. Some take-aways from the live event include:  The current financial system does not serve everyone equally. The inability to access and use financial services impedes people’s full participation in the economy. Communities of color and low-income communities are disproportionately left out of the financial system. Fintech provides an opportunity to reach those excluded by the financial system. Fintech shows promise in furthering financial inclusion. Improvements in transaction processing, digital identity, and use of real-time and alternative data for risk assessment could offer significant improvements to individuals currently left out of the financial system. Fintech solutions designed based on a nuanced understanding of lived experiences of those they serve have greater impact. Many consumers come up with work-arounds or adaptations to work with existing services that do not meet their needs. Efforts to increase diversity in the fintech ecosystem (from founders to staff, venture capital, and regulators) and greater prioritization of learning from the experiences and challenges that users from low-income communities and communities of color face can enable the creation of higher impact fintech solutions.  Related Content  Community Development Innovation Review: Fintech, Racial Equity, and an Inclusive Financial System  Aspen Institute Financial Security Program The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

We’re excited to share a special episode in partnership with our colleagues in the San Francisco Fed’s Community Development group. Our teams recently collaborated on a special issue of the Community Development Innovation Review in partnership with the Aspen Institute’s Financial Security program, which examined the potential ways financial technology can promote racial equity in the financial system. Today’s episode is a corollary to our recently concluded Financial Inclusion &amp; Beyond series where we explored what we can learn from efforts around the world to improve financial inclusion and wellbeing. The event included a fireside chat with San Francisco Fed President Mary Daly and Ida Rademacher, Executive Director of the Aspen Institute’s Financial Security Program, and a panel discussion with several journal contributors moderated by Rocio Sanchez-Moyano, a senior researcher in the Community Development  group. Some take-aways from the live event include: <ul> <li>The current financial system does not serve everyone equally. The inability to access and use financial services impedes people’s full participation in the economy. Communities of color and low-income communities are disproportionately left out of the financial system. Fintech provides an opportunity to reach those excluded by the financial system.</li> <li>Fintech shows promise in furthering financial inclusion. Improvements in transaction processing, digital identity, and use of real-time and alternative data for risk assessment could offer significant improvements to individuals currently left out of the financial system.</li> <li>Fintech solutions designed based on a nuanced understanding of lived experiences of those they serve have greater impact. Many consumers come up with work-arounds or adaptations to work with existing services that do not meet their needs. Efforts to increase diversity in the fintech ecosystem (from founders to staff, venture capital, and regulators) and greater prioritization of learning from the experiences and challenges that users from low-income communities and communities of color face can enable the creation of higher impact fintech solutions.</li> </ul> Related Content <a href="https://www.frbsf.org/community-development/publications/community-development-investment-review/2021/august/fintech-racial-equity-inclusive-financial-system/" rel="nofollow" target="_blank"> Community Development Innovation Review: Fintech, Racial Equity, and an Inclusive Financial System</a> <a href="https://www.aspeninstitute.org/programs/financial-security-program/" rel="nofollow" target="_blank"> Aspen Institute Financial Security Program</a> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Fintech & Racial Equity: Featuring Our Recent Collaboration on the Community Development Innovation Review

In the final episode of Financial Inclusion &amp; Beyond, your series hosts take a look back at key themes and takeaways from our conversations. Some of the key takeaways we review include:  The events of the pandemic left us all humbler at the scope of the challenge we face here in the United States to deliver full financial access to all citizens and promote their financial health. Financial inclusion often conveys the notion of basic access, but true inclusion is about enabling individuals lives and letting them pursue their dreams. Experts from a diverse range of disciplines like impact investing, behavioral economics, and community development are focused on designing new financial products and services to meet the needs of low income populations historically treated as second class citizens in the financial system. Regulators need to grapple with how to promote positive change through their engagement with innovative firms. A narrow focus on simply negating bad outcomes has not been sufficient to create real financial inclusion and racial equity, and a shift in mindset is necessary. The San Francisco Fed’s  Framework for Change makes a persuasive case for the economic benefits of a more inclusive financial system. We are at a critical moment to reflect and take action, and both public and private stakeholders have a lot of work ahead of them to promote meaningful change.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In the final episode of Financial Inclusion &amp; Beyond, your series hosts take a look back at key themes and takeaways from our conversations. Some of the key takeaways we review include: <ul> <li>The events of the pandemic left us all humbler at the scope of the challenge we face here in the United States to deliver full financial access to all citizens and promote their financial health.</li> <li>Financial inclusion often conveys the notion of basic access, but true inclusion is about enabling individuals lives and letting them pursue their dreams.</li> <li>Experts from a diverse range of disciplines like impact investing, behavioral economics, and community development are focused on designing new financial products and services to meet the needs of low income populations historically treated as second class citizens in the financial system.</li> <li>Regulators need to grapple with how to promote positive change through their engagement with innovative firms. A narrow focus on simply negating bad outcomes has not been sufficient to create real financial inclusion and racial equity, and a shift in mindset is necessary.</li> <li>The San Francisco Fed’s <a href="https://www.frbsf.org/our-district/about/sf-fed-blog/confronting-inequity-framework-for-change/" rel="nofollow" target="_blank"> Framework for Change</a> makes a persuasive case for the economic benefits of a more inclusive financial system. We are at a critical moment to reflect and take action, and both public and private stakeholders have a lot of work ahead of them to promote meaningful change.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Financial Inclusion & Beyond Series Wrap-up

Ramp

Our Pacific Exchanges team recently hosted a special Financial Inclusion and Beyond live virtual event that explored lessons from around the world in the use of technology and public policy to build more inclusive financial systems and drive financial health. The event was moderated by Sean Creehan, the team's lead for financial health and inclusion, and brought together professionals from different corners of the financial inclusion and health spaces, including Greta Bull, the president and chief executive officer of the Consultative Group to Assist the Poor (CGAP); José Quiñonez, the founding chief executive officer of Mission Asset Fund (MAF); Arjuna Costa, a managing partner at Flourish Ventures; and Ting Jiang, a behavioral economist. We’re excited to share the live event in full as a special episode of Financial Inclusion and Beyond. Regular listeners of the podcast will recognize these voices from their episodes throughout the season; the live event allowed them to discuss how they were managing the challenges to inclusion posed by the COVID-19 pandemic. Some take-aways from the live event include:  The COVID-19 pandemic has dramatically affected efforts to improve financial inclusion and health. Organizations like CGAP, a World Bank Group affiliate, and MAF, which traditionally focus on the longer-term issues of inclusion, had to re-focus efforts almost overnight to deal with issues related to public health. Those countries which had invested in digital financial system infrastructure could respond with stimulus relief quicker than those which relied on traditional models. Ting Jiang zeroed in the pandemic's effects at the individual level.  At the individual level, it is important to adapt behaviors and develop products and technologies that withstand moments of stress.   The poor shouldn't be forced to be secondary or third-order users of financial products but should have access to products designed for their lifestyles at an affordable cost. Fintech should be celebrated when it is also in service of the poor, not simply because it is a shiny new toy.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Our Pacific Exchanges team recently hosted a special Financial Inclusion and Beyond live virtual event that explored lessons from around the world in the use of technology and public policy to build more inclusive financial systems and drive financial health. The event was moderated by Sean Creehan, the team's lead for financial health and inclusion, and brought together professionals from different corners of the financial inclusion and health spaces, including Greta Bull, the president and chief executive officer of the Consultative Group to Assist the Poor (CGAP); José Quiñonez, the founding chief executive officer of Mission Asset Fund (MAF); Arjuna Costa, a managing partner at Flourish Ventures; and Ting Jiang, a behavioral economist. We’re excited to share the live event in full as a special episode of Financial Inclusion and Beyond. Regular listeners of the podcast will recognize these voices from their episodes throughout the season; the live event allowed them to discuss how they were managing the challenges to inclusion posed by the COVID-19 pandemic. Some take-aways from the live event include: <ul> <li>The COVID-19 pandemic has dramatically affected efforts to improve financial inclusion and health. Organizations like CGAP, a World Bank Group affiliate, and MAF, which traditionally focus on the longer-term issues of inclusion, had to re-focus efforts almost overnight to deal with issues related to public health.</li> <li>Those countries which had invested in digital financial system infrastructure could respond with stimulus relief quicker than those which relied on traditional models. Ting Jiang zeroed in the pandemic's effects at the individual level. </li> <li>At the individual level, it is important to adapt behaviors and develop products and technologies that withstand moments of stress.</li> </ul> <ul> <li>The poor shouldn't be forced to be secondary or third-order users of financial products but should have access to products designed for their lifestyles at an affordable cost. Fintech should be celebrated when it is also in service of the poor, not simply because it is a shiny new toy.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Live Virtual Event: Creating an “On-Ramp” For Financial Inclusion

In episode nine of Financial Inclusion &amp; Beyond, we spoke with Grovetta Gardineer, the Senior Deputy Comptroller for Bank Supervision Policy at the Office of the Comptroller of the Currency. As a veteran bank regulator with more than three decades of experience in banking supervision, policy and regulation, Grovetta is a well-known leader and expert in the space of compliance and community programs. We sat down to discuss lessons learned from the COVID crisis, financial inclusion challenges here in the United States, as well as the role public policy and regulation should play.  Key takeaways from the discussion include:   The US financial system has failed to provide equitable access for people of color. The barriers to financial access have prevented excluded populations, African Americans in particular, to achieve a healthy financial life and to build generational wealth. To tackle inclusion challenges, the OCC and other regulatory agencies have taken concrete steps to engage in a collaborative effort, Project REACh. The project focuses on three broad areas: bringing so-called “credit invisible” populations back into an inclusive financial system, increasing affordable housing, and recognizing the crucial role that minority depository institutions play in the United States. This effort must leverage the strength of various stakeholders, including all types of financial institutions, businesses, and community groups. For example, fintech firms’ approach to alternative credit scoring can provide opportunities as they partner with innovative banks. While there are benefits offered from collecting financial data, strict privacy guidelines and expectations need to be established to ensure consumer confidence and trust of the financial system.  Join Our Live Event May 18! We will be hosting a live virtual event to mark the release of Financial inclusion &amp; Beyond, the fourth season of our Pacific Exchanges podcast with a panel of four experts who appear in the series. We’ll discuss their lessons learned from the COVID-19 crisis and how the pandemic has underscored the importance of building inclusive financial systems that enable everyone’s financial health and promote equal opportunities.  Details and registration link here. Related Content  Project REACh The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In episode nine of Financial Inclusion &amp; Beyond, we spoke with Grovetta Gardineer, the Senior Deputy Comptroller for Bank Supervision Policy at the Office of the Comptroller of the Currency. As a veteran bank regulator with more than three decades of experience in banking supervision, policy and regulation, Grovetta is a well-known leader and expert in the space of compliance and community programs. We sat down to discuss lessons learned from the COVID crisis, financial inclusion challenges here in the United States, as well as the role public policy and regulation should play.  Key takeaways from the discussion include:  <ul> <li>The US financial system has failed to provide equitable access for people of color. The barriers to financial access have prevented excluded populations, African Americans in particular, to achieve a healthy financial life and to build generational wealth.</li> <li>To tackle inclusion challenges, the OCC and other regulatory agencies have taken concrete steps to engage in a collaborative effort, Project REACh. The project focuses on three broad areas: bringing so-called “credit invisible” populations back into an inclusive financial system, increasing affordable housing, and recognizing the crucial role that minority depository institutions play in the United States.</li> <li>This effort must leverage the strength of various stakeholders, including all types of financial institutions, businesses, and community groups. For example, fintech firms’ approach to alternative credit scoring can provide opportunities as they partner with innovative banks.</li> <li>While there are benefits offered from collecting financial data, strict privacy guidelines and expectations need to be established to ensure consumer confidence and trust of the financial system.</li> </ul> Join Our Live Event May 18! We will be hosting a live virtual event to mark the release of Financial inclusion &amp; Beyond, the fourth season of our Pacific Exchanges podcast with a panel of four experts who appear in the series. We’ll discuss their lessons learned from the COVID-19 crisis and how the pandemic has underscored the importance of building inclusive financial systems that enable everyone’s financial health and promote equal opportunities. <a href="https://www.frbsf.org/banking/fintech/events/2021/may/financial-inclusion-and-beyond-expert-panel/" rel="nofollow" target="_blank"> Details and registration link here</a>. Related Content <a href="https://www.occ.treas.gov/topics/consumers-and-communities/minority-outreach/project-reach.html" rel="nofollow" target="_blank">Project REACh</a> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Grovetta Gardineer Reflects upon Inclusion Challenges in the United States

In episode eight of Financial Inclusion &amp; Beyond, we spoke with Tracy Basinger, the recently retired head of supervision here at the San Francisco Fed. Tracy has spent her career focused on the impact of financial services on everyday citizens. From leading consumer protection here at the San Francisco Fed  to overseeing a nationwide team considering policy solutions for small businesses suffering during the COVID-19 crisis, Tracy has thought long and hard about the role of  public policy, regulation, and technology in promoting a more inclusive financial system.  We get into examples of financial innovations that are promoting inclusion and the challenges for regulators and policymakers who want to minimize risks to consumers and the broader financial system while not getting in the way of positive change. And we talk about how to shift from a historical mindset that focused on preventing exclusion to one that thinks about ways to promote inclusion and broader notions of financial health and wellbeing.  Key takeaways from the discussion include:   The challenges of 2020 made it abundantly clear that our financial system is not fair and forced financial regulators to re-consider rules and policies to ask how they promote or detract from efforts to build a more inclusive financial system. Historically regulators have been considered successful if they prevent bad things from happening. Shifting to an approach to not only protect consumers, but help them meaningfully participate in the financial system, requires a different mindset. Regulating modern financial technology is not simple. The rapid adoption and scaling of new innovations increase their potential both to create benefit and cause harm. To the extent technology is clearly providing a benefit, even an only incremental one, without causing obvious harm, regulators should be enabling it. Providing clarity around rules and regulations to firms is crucial to enable innovation that drives inclusion and financial health. Regulators and supervisors should be engaged from the very beginning to understand the role of new technology, provide guidance when necessary, and avoid reacting after the fact once a problem has surfaced.  Related Content  Virtual Fireside Chat with Tracy Basinger and Kavita Jain The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In episode eight of Financial Inclusion &amp; Beyond, we spoke with Tracy Basinger, the recently retired head of supervision here at the San Francisco Fed. Tracy has spent her career focused on the impact of financial services on everyday citizens. From leading consumer protection here at the San Francisco Fed  to overseeing a nationwide team considering policy solutions for small businesses suffering during the COVID-19 crisis, Tracy has thought long and hard about the role of  public policy, regulation, and technology in promoting a more inclusive financial system.  We get into examples of financial innovations that are promoting inclusion and the challenges for regulators and policymakers who want to minimize risks to consumers and the broader financial system while not getting in the way of positive change. And we talk about how to shift from a historical mindset that focused on preventing exclusion to one that thinks about ways to promote inclusion and broader notions of financial health and wellbeing.  Key takeaways from the discussion include:  <ul> <li>The challenges of 2020 made it abundantly clear that our financial system is not fair and forced financial regulators to re-consider rules and policies to ask how they promote or detract from efforts to build a more inclusive financial system.</li> <li>Historically regulators have been considered successful if they prevent bad things from happening. Shifting to an approach to not only protect consumers, but help them meaningfully participate in the financial system, requires a different mindset.</li> <li>Regulating modern financial technology is not simple. The rapid adoption and scaling of new innovations increase their potential both to create benefit and cause harm. To the extent technology is clearly providing a benefit, even an only incremental one, without causing obvious harm, regulators should be enabling it.</li> <li>Providing clarity around rules and regulations to firms is crucial to enable innovation that drives inclusion and financial health. Regulators and supervisors should be engaged from the very beginning to understand the role of new technology, provide guidance when necessary, and avoid reacting after the fact once a problem has surfaced.</li> </ul> Related Content <a href="https://www.frbsf.org/banking/fintech/events/2020/august/fireside-chat-tracy-basinger-kavita-jain/" rel="nofollow" target="_blank"> Virtual Fireside Chat with Tracy Basinger and Kavita Jain</a> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Tracy Basinger on Shifting the Regulator Mindset to Encourage Inclusive Innovation

In episode seven of Financial Inclusion &amp; Beyond, we spoke with Matt Homer, Deputy Commissioner of the Research and Innovation division of the New York State Department of Financial Services. Matt is an expert on the use of data and technology for social good. He has previously held positions in the U.S. government and financial technology sectors where he has focused on issues like the role of digital identity in promoting financial inclusion and wellbeing. We get into the benefits of inclusive technology, but also the potential for digitization to exclude some vulnerable populations, and the unexpected challenges policymakers and firms face in delivering new financial services to people that previously lacked access We also discuss the broader trade-offs between inclusion, privacy, and other emerging data rights. Key takeaways from the discussion include:   People that aren’t a part of the formal financial system don’t dream of things like getting access to a bank account—a traditional indicator of financial inclusion in the past. They want tools to access the digital economy, whether to operate a business or save for the future. Universal digital identities that enable people to verify themselves with financial service providers are critical infrastructure for any efforts to include more people in the financial system and broaden their ability to transact in the digital economy. Policymakers and private companies designing digital identity and other enabling infrastructure must be careful to provide multiple pathways for people to gain access. Matt provides the cautionary example of a brick maker in India whose fingerprints were so worn down that he needed his son to help him provide biometric verification for financial transactions. Protections for customer data rights, from privacy to ownership, are also crucial in promoting inclusive digital financial systems. Matt argues that in countries like the United States, we need a new trust framework to govern data use in the emerging digital economy, helping people better understand and control the use of their data.  Please note that the initial interview was recorded prior to the onset of the COVID-19 crisis.  Related Content New York Department of Financial Services RegTech Sprint The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In episode seven of Financial Inclusion &amp; Beyond, we spoke with Matt Homer, Deputy Commissioner of the Research and Innovation division of the New York State Department of Financial Services. Matt is an expert on the use of data and technology for social good. He has previously held positions in the U.S. government and financial technology sectors where he has focused on issues like the role of digital identity in promoting financial inclusion and wellbeing. We get into the benefits of inclusive technology, but also the potential for digitization to exclude some vulnerable populations, and the unexpected challenges policymakers and firms face in delivering new financial services to people that previously lacked access We also discuss the broader trade-offs between inclusion, privacy, and other emerging data rights. Key takeaways from the discussion include:  <ul> <li>People that aren’t a part of the formal financial system don’t dream of things like getting access to a bank account—a traditional indicator of financial inclusion in the past. They want tools to access the digital economy, whether to operate a business or save for the future.</li> <li>Universal digital identities that enable people to verify themselves with financial service providers are critical infrastructure for any efforts to include more people in the financial system and broaden their ability to transact in the digital economy.</li> <li>Policymakers and private companies designing digital identity and other enabling infrastructure must be careful to provide multiple pathways for people to gain access. Matt provides the cautionary example of a brick maker in India whose fingerprints were so worn down that he needed his son to help him provide biometric verification for financial transactions.</li> <li>Protections for customer data rights, from privacy to ownership, are also crucial in promoting inclusive digital financial systems. Matt argues that in countries like the United States, we need a new trust framework to govern data use in the emerging digital economy, helping people better understand and control the use of their data.</li> </ul> Please note that the initial interview was recorded prior to the onset of the COVID-19 crisis.  Related Content <a href="https://www.dfs.ny.gov/techsprint" rel="nofollow" target="_blank">New York Department of Financial Services RegTech Sprint</a> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Matt Homer on the Importance of Getting Digital Identity Right

In episode six of Financial Inclusion &amp; Beyond, we spoke with Chris Calabia, the Senior Advisor for Supervisory and Regulatory Policy, Financial Services for the Poor at the Bill &amp; Melinda Gates Foundation. Chris leads the Foundation’s global efforts to promote a regulatory framework that enables digital financial innovation. Previously he was a Senior Vice President and Banking Supervisor at the Federal Reserve Bank of New York. We sat down to discuss how to drive financial health for the world's poor by improving access to essential financial services through better public policy and regulation. Chris also shared his insights from the Gates Foundation’s efforts to help promote access to financial services among the unbanked, poor and women, especially in lower and middle income countries around the world. Key takeaways from the discussion include:   There has been focus among policymakers, regulators, central banks, and others, to try to improve access to a financial services account in the past 10-15 years. Despite visible progress, there are still 1.7 billion people globally left without access. Evidence suggests that access to financial services can improve economic opportunity for the poor and help them build resiliency against unexpected shocks. Regulation should ensure that providers are able to serve the poor, and welcome new providers such as mobile network operators, fintech companies, and social media platforms into financial services. Gates Foundation research found that countries with functioning digital financial services were far better able to deliver pandemic-related relief to their citizens. One example of digital solutions helping improve efficiency and access is India, where the government has started to digitalize social welfare benefits. Elsewhere, the Gates Foundation has sponsored experiments to encourage digitalizing payroll in Bangladesh and other developing economies. Digital infrastructure, such as digital identification systems, can facilitate various banking functions such as e-KYC and remote onboarding of customers by financial institutions. Other segments of the economy including healthcare providers or the education industry could also benefit from digital identification which will make a huge difference in the lives of the poor.    Please note that the initial interview was recorded prior to the onset of the COVID-19 crisis.  Related Content  Emergency Disbursements During COVID-19: Regulatory Tools for Rapid Account Opening and Oversight  Three steps towards more resilient and inclusive post-COVID-19 economies  After the Pandemic, Put Women First  Google and Gates Foundation to help spread digital payments in developing countries  Gates Foundation Leads With Digital Payments In Financial Inclusion Initiative  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In episode six of Financial Inclusion &amp; Beyond, we spoke with Chris Calabia, the Senior Advisor for Supervisory and Regulatory Policy, Financial Services for the Poor at the Bill &amp; Melinda Gates Foundation. Chris leads the Foundation’s global efforts to promote a regulatory framework that enables digital financial innovation. Previously he was a Senior Vice President and Banking Supervisor at the Federal Reserve Bank of New York. We sat down to discuss how to drive financial health for the world's poor by improving access to essential financial services through better public policy and regulation. Chris also shared his insights from the Gates Foundation’s efforts to help promote access to financial services among the unbanked, poor and women, especially in lower and middle income countries around the world. Key takeaways from the discussion include:  <ul> <li>There has been focus among policymakers, regulators, central banks, and others, to try to improve access to a financial services account in the past 10-15 years. Despite visible progress, there are still 1.7 billion people globally left without access.</li> <li>Evidence suggests that access to financial services can improve economic opportunity for the poor and help them build resiliency against unexpected shocks. Regulation should ensure that providers are able to serve the poor, and welcome new providers such as mobile network operators, fintech companies, and social media platforms into financial services.</li> <li>Gates Foundation research found that countries with functioning digital financial services were far better able to deliver pandemic-related relief to their citizens.</li> <li>One example of digital solutions helping improve efficiency and access is India, where the government has started to digitalize social welfare benefits. Elsewhere, the Gates Foundation has sponsored experiments to encourage digitalizing payroll in Bangladesh and other developing economies.</li> <li>Digital infrastructure, such as digital identification systems, can facilitate various banking functions such as e-KYC and remote onboarding of customers by financial institutions. Other segments of the economy including healthcare providers or the education industry could also benefit from digital identification which will make a huge difference in the lives of the poor.</li> <li> </li> </ul> Please note that the initial interview was recorded prior to the onset of the COVID-19 crisis.  Related Content <a href="https://nam10.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.findevgateway.org%2Fpaper%2F2020%2F07%2Femergency-disbursements-during-covid-19-regulatory-tools-rapid-account-opening-and&amp;data=04%7C01%7CChristopher.CALABIA%40gatesfoundation.org%7Cad5fad44a0a24a197dd808d909986cd6%7C296b38384bd5496cbd4bf456ea743b74%7C0%7C0%7C637551372550499528%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&amp;sdata=ZRipT%2F3lwOpUY%2BRib5qTeDoZpcPbbxF5SkWFFV%2FBm4E%3D&amp;reserved=0" rel="nofollow" target="_blank"> Emergency Disbursements During COVID-19: Regulatory Tools for Rapid Account Opening and Oversight</a> <a href="https://nam10.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.cnbcafrica.com%2F2021%2Fthree-steps-towards-more-resilient-and-inclusive-post-covid-19-economies%2F&amp;data=04%7C01%7CChristopher.CALABIA%40gatesfoundation.org%7Cad5fad44a0a24a197dd808d909986cd6%7C296b38384bd5496cbd4bf456ea743b74%7C0%7C0%7C637551372550499528%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&amp;sdata=IGkeWR88NhzszfFue7wKZYpoO0XoDRqT5YjESfLpAjs%3D&amp;reserved=0" rel="nofollow" target="_blank"> Three steps towards more resilient and inclusive post-COVID-19 economies</a> <a href="https://www.bloomberg.com/opinion/articles/2021-02-18/melinda-gates-wants-to-prioritize-women-in-covid-19-recovery" rel="nofollow" target="_blank"> After the Pandemic, Put Women First</a> <a href="https://nam10.safelinks.protection.outlook.com/?url=https%3A%2F%2Ffortune.com%2F2020%2F05%2F06%2Fgoogle-gates-foundation-digital-payments-developing-countries%2F&amp;data=04%7C01%7CChristopher.CALABIA%40gatesfoundation.org%7Cad5fad44a0a24a197dd808d909986cd6%7C296b38384bd5496cbd4bf456ea743b74%7C0%7C0%7C637551372550509491%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&amp;sdata=l7M%2Fo1rEaDVhM36Bph3qZvF%2FoYWNotpsNEFJUir%2FXiE%3D&amp;reserved=0" rel="nofollow" target="_blank"> Google and Gates Foundation to help spread digital payments in developing countries</a> <a href="https://www.pymnts.com/financial-inclusion-3/2021/gates-foundation-leads-with-digital-payments-in-financial-inclusion-initiative/" rel="nofollow" target="_blank"> Gates Foundation Leads With Digital Payments In Financial Inclusion Initiative</a> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Chris Calabia on the Role of Public Policy and Regulation in Improving Access to Finance

Ting Jiang

In episode five of Financial Inclusion &amp; Beyond, we spoke with Ting Jiang, a behavioral economist who researches and designs products for behavioral change. At the time of this recording, which took place prior to the pandemic, Ting was associated with Duke University's Center for Advanced Hindsight. We sat down to discuss the way behavioral scientists and product designers can work together to build better financial products that help people take action to improve their financial health. Key takeaways from the discussion include:  Identifying the source of unhealthy financial behavior is a critical step for product designers or policy makers that wish to promote health. While financial literacy is often emphasized as a tool to help low-income populations improve their wellbeing, most poor people understand very well how to manage their money, but there may be other barriers that get in the way. Behavioral science-informed products can help people remember and act upon their good intentions (e.g. to save money or buy insurance) when the complexities and stresses of daily life might otherwise interfere. Technological and human interventions can help bridge the intention-behavior gap.  These designs can appear simple but are effective in behavioral change. New technology can also help people better imagine their future selves and the potential unexpected shocks of life, suggesting actions to take right now to build resilience for tough times.  The more concrete and tangible the future opportunities or stress scenarios feel to an individual, the more likely they are to take action. Improving the financial wellbeing of a subset of a population can lead to a win-win situation for the individual, their communities, and the financial system.  For example, a financial firm helping urban migrant workers in China helps their communities and networks in rural areas, and in turn grows their potential client base.    Please note that the initial interview was recorded prior to the onset of the COVID-19 crisis.  Related Content Behavior Change and Interpersonal Connection (Clearer Thinking Podcast) The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In episode five of Financial Inclusion &amp; Beyond, we spoke with Ting Jiang, a behavioral economist who researches and designs products for behavioral change. At the time of this recording, which took place prior to the pandemic, Ting was associated with Duke University's Center for Advanced Hindsight. We sat down to discuss the way behavioral scientists and product designers can work together to build better financial products that help people take action to improve their financial health. Key takeaways from the discussion include: <ul> <li>Identifying the source of unhealthy financial behavior is a critical step for product designers or policy makers that wish to promote health. While financial literacy is often emphasized as a tool to help low-income populations improve their wellbeing, most poor people understand very well how to manage their money, but there may be other barriers that get in the way.</li> <li>Behavioral science-informed products can help people remember and act upon their good intentions (e.g. to save money or buy insurance) when the complexities and stresses of daily life might otherwise interfere. Technological and human interventions can help bridge the intention-behavior gap.  These designs can appear simple but are effective in behavioral change.</li> <li>New technology can also help people better imagine their future selves and the potential unexpected shocks of life, suggesting actions to take right now to build resilience for tough times.  The more concrete and tangible the future opportunities or stress scenarios feel to an individual, the more likely they are to take action.</li> <li>Improving the financial wellbeing of a subset of a population can lead to a win-win situation for the individual, their communities, and the financial system.  For example, a financial firm helping urban migrant workers in China helps their communities and networks in rural areas, and in turn grows their potential client base.  </li> </ul> Please note that the initial interview was recorded prior to the onset of the COVID-19 crisis.  Related Content <a href="https://clearerthinkingpodcast.com/?ep=037" rel="nofollow" target="_blank">Behavior Change and Interpersonal Connection (Clearer Thinking Podcast)</a> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Ting Jiang on How Better Financial Products Can Conquer Our Inner Homer Simpson

José Quiñonez

In episode four of our series Financial Inclusion &amp; Beyond, we spoke with José Quiñonez, the founding chief executive officer of Mission Asset Fund (MAF) and a visiting professor at UC Berkeley, Department of City and Regional Planning. MAF uses innovative national models for integrating financially excluded, low-income communities into the mainstream. We sat down to discuss how the formal financial system leaves credit invisible (individuals without a credit background) behind. José discussed how MAF is helping those that have typically been left out get integrated into the formal financial system. MAF is drawing on the rich tradition of lending circles to help the low-income and immigrant communities develop a credit history and join the financial system. Key takeaways from the discussion include:   José draws on his experience and insights from working with the local San Francisco immigrant community and shares his view on how to improve financial inclusion and financial health. Low-income individuals traditionally are secondary users of financial products. Banks and fintechs can ‘meet people where they are,’ by building products to address the primary concerns of the low-income community. The growing awareness of financial inclusion and financial health reflects a broader understanding that there are more systemic issues at play that keep many low-income individuals credit invisible. Having a bank account is only the first step towards financial actualization. For poor people to manage complex financial lives, financial services providers, regulators and non-governmental organizations all need to come up with innovative solutions tailored to specific needs of underserved users.  Please note that the initial interview was recorded prior to the onset of the COVID-19 crisis.  Related Content  Lending Circle Program Evaluation Released  Clearing the Path for Lending Circles  Financial Emergency Action Plan for Immigrants  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In episode four of our series Financial Inclusion &amp; Beyond, we spoke with José Quiñonez, the founding chief executive officer of Mission Asset Fund (MAF) and a visiting professor at UC Berkeley, Department of City and Regional Planning. MAF uses innovative national models for integrating financially excluded, low-income communities into the mainstream. We sat down to discuss how the formal financial system leaves credit invisible (individuals without a credit background) behind. José discussed how MAF is helping those that have typically been left out get integrated into the formal financial system. MAF is drawing on the rich tradition of lending circles to help the low-income and immigrant communities develop a credit history and join the financial system. Key takeaways from the discussion include:  <ul> <li>José draws on his experience and insights from working with the local San Francisco immigrant community and shares his view on how to improve financial inclusion and financial health.</li> <li>Low-income individuals traditionally are secondary users of financial products. Banks and fintechs can ‘meet people where they are,’ by building products to address the primary concerns of the low-income community.</li> <li>The growing awareness of financial inclusion and financial health reflects a broader understanding that there are more systemic issues at play that keep many low-income individuals credit invisible.</li> <li>Having a bank account is only the first step towards financial actualization. For poor people to manage complex financial lives, financial services providers, regulators and non-governmental organizations all need to come up with innovative solutions tailored to specific needs of underserved users.</li> </ul> Please note that the initial interview was recorded prior to the onset of the COVID-19 crisis.  Related Content <a href="https://www.missionassetfund.org/lending-circles-evaluation-released/" rel="nofollow" target="_blank"> Lending Circle Program Evaluation Released</a> <a href="https://www.missionassetfund.org/clearing-the-path-for-lending-circles/" rel="nofollow" target="_blank"> Clearing the Path for Lending Circles</a> <a href="https://missionassetfund.org/wp-content/uploads/2019/07/Financial-Emergency-Guide-for-Immigrants.pdf" rel="nofollow" target="_blank"> Financial Emergency Action Plan for Immigrants</a> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

José Quiñonez on Seeing the Credit invisible

In episode three of Financial Inclusion &amp; Beyond, we spoke with Arjuna Costa, managing partner of Flourish Ventures, a leading social impact fund focused on financial health. Arjuna invests in entrepreneurs around the world to catalyze innovations that help people achieve financial health. We sat down to discuss the way entrepreneurs are harnessing the power of behavioral economics and customer-centric design to meet the everyday financial challenges of low income populations. Key takeaways from the discussion include:  For too long, financial systems have thought in terms of standardized products that do not always meet the needs of customers or enable their life goals. Challenges common in emerging economies often force individuals to become micro-entrepreneurs out of necessity, spurring demand for new financial solutions. This has led to many innovations that are now coming back to developed countries like the United States. Partnerships between incumbent banks and fintech start-ups can help spread inclusive innovations throughout the financial system, emphasizing the need for banks and regulators to consider how to enable more collaboration. While financial product innovation can do a lot of good, inclusive economic growth and robust social safety nets are essential to provide the steady income streams that support financial health and resilience in good times and bad.   Please note that the initial interview was recorded prior to the onset of the COVID-19 crisis.  Related Content  The Digital Hustle: Gig Worker Financial Lives Under Pressure, U.S. Spotlight 2020  The Digital Hustle: Gig Worker Financial Lives Under Pressure, India Spotlight 2020  The Digital Hustle: Gig Worker Financial Lives Under Pressure, Indonesia Spotlight 2020 The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In episode three of Financial Inclusion &amp; Beyond, we spoke with Arjuna Costa, managing partner of Flourish Ventures, a leading social impact fund focused on financial health. Arjuna invests in entrepreneurs around the world to catalyze innovations that help people achieve financial health. We sat down to discuss the way entrepreneurs are harnessing the power of behavioral economics and customer-centric design to meet the everyday financial challenges of low income populations. Key takeaways from the discussion include: <ul> <li>For too long, financial systems have thought in terms of standardized products that do not always meet the needs of customers or enable their life goals.</li> <li>Challenges common in emerging economies often force individuals to become micro-entrepreneurs out of necessity, spurring demand for new financial solutions. This has led to many innovations that are now coming back to developed countries like the United States.</li> <li>Partnerships between incumbent banks and fintech start-ups can help spread inclusive innovations throughout the financial system, emphasizing the need for banks and regulators to consider how to enable more collaboration.</li> <li>While financial product innovation can do a lot of good, inclusive economic growth and robust social safety nets are essential to provide the steady income streams that support financial health and resilience in good times and bad.</li> </ul> Please note that the initial interview was recorded prior to the onset of the COVID-19 crisis.  Related Content <a href="https://flourishventures.com/perspectives/the-digital-hustle-gig-worker-financial-lives-under-pressure-us-spotlight-2020/" rel="nofollow" target="_blank"> The Digital Hustle: Gig Worker Financial Lives Under Pressure, U.S. Spotlight 2020</a> <a href="https://flourishventures.com/perspectives/the-digital-hustle-gig-worker-financial-lives-under-pressure-india-spotlight-2020/" rel="nofollow" target="_blank"> The Digital Hustle: Gig Worker Financial Lives Under Pressure, India Spotlight 2020</a> <a href="https://flourishventures.com/perspectives/the-digital-hustle-gig-worker-financial-lives-under-pressure-indonesia-spotlight-2020/" rel="nofollow" target="_blank"> The Digital Hustle: Gig Worker Financial Lives Under Pressure, Indonesia Spotlight 2020</a> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Arjuna Costa on Designing Financial Products for the Unincluded

Pacific Exchanges is a podcast from the Federal Reserve Bank of San Francisco. The show features interviews with experts in economics and finance to explore emerging trends around the world such as new uses of financial technology and their impacts on financial health and inclusion.The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Though-provoking

This podcast is great for those looking to learn more about finance in Asia.

Excellent and Informative!

Pacific Exchanges is a podcast from the Federal Reserve Bank of San Francisco. The show features interviews with experts in economics and finance to explore emerging trends around the world such as new uses of financial technology and their impacts on financial health and inclusion. The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Pacific Exchanges

In this next episode of our series Rethinking Asia, we pick up where we left off last episode looking at the role of debt in China’s economy. We spoke with Charlene Chu, a senior partner for China macro-financial research at Autonomous Research, an independent research firm. Well known for her analysis of China’s shadow banking industry, Charlene previously was a senior director covering Chinese financial institutions at Fitch Ratings. Charlene gave her assessment of the recent rise in Chinese debt and why she thinks a painless deleveraging is unlikely. While China has implemented some reforms in recent years, it has mostly avoided deleveraging. Previously, China relied on a high deposit base to support credit expansion, but new credit consistently outstrips deposit growth making the levels of credit growth unsustainable. Some of Charlene’s main takeaways include:   China’s debt-to-GDP has increased by nearly 150 percentage points since the Global Financial Crisis, accompanied by a $30 trillion increase in the banking sector. While other countries have experienced large increases in debt-to-GDP before, the size and scale of China’s economy makes the growth alarming. The vast majority of China’s debt is in the corporate and property sectors. China has also experienced a run up in consumer debt over the last few years, but, currently there is no concern in households’ ability to service the debt. One of the most troubling aspects of China’s debt problem is the surge in the more opaque and less regulated shadow banking sector. However, the merging of two regulatory bodies should reduce some of the regulatory arbitrage that has allowed off balance sheet lending to grow. While a financial crisis is not preordained, Charlene dismissed the prospects of a “beautiful deleveraging.” Any attempts to deal with China’s debt burden will require hard decisions, including shuttering less productive companies by forcing them to realize losses, reining in shadow banking, capping credit growth, adjusting lending rates to account for risk, and accepting lower levels of GDP growth.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In this next episode of our series Rethinking Asia, we pick up where we left off last episode looking at the role of debt in China’s economy. We spoke with Charlene Chu, a senior partner for China macro-financial research at Autonomous Research, an independent research firm. Well known for her analysis of China’s shadow banking industry, Charlene previously was a senior director covering Chinese financial institutions at Fitch Ratings. Charlene gave her assessment of the recent rise in Chinese debt and why she thinks a painless deleveraging is unlikely. While China has implemented some reforms in recent years, it has mostly avoided deleveraging. Previously, China relied on a high deposit base to support credit expansion, but new credit consistently outstrips deposit growth making the levels of credit growth unsustainable. Some of Charlene’s main takeaways include:  <ul> <li>China’s debt-to-GDP has increased by nearly 150 percentage points since the Global Financial Crisis, accompanied by a $30 trillion increase in the banking sector. While other countries have experienced large increases in debt-to-GDP before, the size and scale of China’s economy makes the growth alarming.</li> <li>The vast majority of China’s debt is in the corporate and property sectors. China has also experienced a run up in consumer debt over the last few years, but, currently there is no concern in households’ ability to service the debt.</li> <li>One of the most troubling aspects of China’s debt problem is the surge in the more opaque and less regulated shadow banking sector. However, the merging of two regulatory bodies should reduce some of the regulatory arbitrage that has allowed off balance sheet lending to grow.</li> <li>While a financial crisis is not preordained, Charlene dismissed the prospects of a “beautiful deleveraging.” Any attempts to deal with China’s debt burden will require hard decisions, including shuttering less productive companies by forcing them to realize losses, reining in shadow banking, capping credit growth, adjusting lending rates to account for risk, and accepting lower levels of GDP growth.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 3 - Rethinking Asia: The Role of Debt and Shadow Banking in China’s Economy

Barry Eichengreen

In the seventh episode of our series on the Asian financial crisis, we spoke with Barry Eichengreen, a professor of economics and political science at UC Berkeley. He's written extensively about the sequencing of financial opening in Asia and the challenges associated with cross-border capital flows. He's also authored numerous articles looking back on the lessons from the Asian financial crisis.

In the seventh episode of our series on the Asian financial crisis, we spoke with Barry Eichengreen, a professor of economics and political science at UC Berkeley. He's written extensively about the sequencing of financial opening in Asia and the challenges associated with cross-border capital flows. He's also authored numerous articles looking back on the lessons from the Asian financial crisis.

Season 2 - Looking Back at the Asian Financial Crisis: Barry Eichengreen on the East-West Debate over the Asian Financial Crisis

In the second episode of our series Rethinking Asia, we spoke with Manoj Pradhan of Talking Heads Macro in London. He's an expert in the relationship between demographics and capital markets, looking at how aging and labor force changes impact everything from global interest rates and wages to inequality. Prior to his current role, he worked as a macroeconomist at Morgan Stanley. Manoj gives us unique perspectives on how changing demographic trends in Asia will likely affect future inflation and wage growth. We also discuss the challenges posed by aging demographics and automation. Some of our key takeaways from the exchange with Manoj include:   The enormous growth of the global labor supply in the 1980s and 1990s—driven in large part by the integration of China’s labor force—is now reversing. Demographic changes in Europe and Asia will likely upend most people’s expectations regarding future inflation, interest rates, and financial market risks. Demographic transitions and smaller labor forces are expected to raise inflation and limit central banks’ ability to rein it in without curtailing economic growth. Within Asia, demographic trends are not uniform: north and east Asian countries are aging quickly while countries like India and Indonesia are benefiting from a demographic dividend, and their growing labor force could make those countries new global manufacturing hubs. An aging and shrinking work force in China is leading to wage growth and helping the economy rebalance by supporting greater consumption as a share of GDP. Countries like Japan and Korea face several demographic challenges related to aging: more workers will need to shift into jobs related to aging, governments will be pushed to consider policies to reallocate resources to alleviate inter-generational inequalities, and societies will need to adjust to permanently smaller labor forces.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In the second episode of our series Rethinking Asia, we spoke with Manoj Pradhan of Talking Heads Macro in London. He's an expert in the relationship between demographics and capital markets, looking at how aging and labor force changes impact everything from global interest rates and wages to inequality. Prior to his current role, he worked as a macroeconomist at Morgan Stanley. Manoj gives us unique perspectives on how changing demographic trends in Asia will likely affect future inflation and wage growth. We also discuss the challenges posed by aging demographics and automation. Some of our key takeaways from the exchange with Manoj include:  <ul> <li>The enormous growth of the global labor supply in the 1980s and 1990s—driven in large part by the integration of China’s labor force—is now reversing. Demographic changes in Europe and Asia will likely upend most people’s expectations regarding future inflation, interest rates, and financial market risks.</li> <li>Demographic transitions and smaller labor forces are expected to raise inflation and limit central banks’ ability to rein it in without curtailing economic growth.</li> <li>Within Asia, demographic trends are not uniform: north and east Asian countries are aging quickly while countries like India and Indonesia are benefiting from a demographic dividend, and their growing labor force could make those countries new global manufacturing hubs.</li> <li>An aging and shrinking work force in China is leading to wage growth and helping the economy rebalance by supporting greater consumption as a share of GDP.</li> <li>Countries like Japan and Korea face several demographic challenges related to aging: more workers will need to shift into jobs related to aging, governments will be pushed to consider policies to reallocate resources to alleviate inter-generational inequalities, and societies will need to adjust to permanently smaller labor forces.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 3 - Rethinking Asia: Asia’s Diverging Demographic Destinies

In this episode, we continued our ongoing series on fintech in Asia by interviewing David Hardoon, the Chief Data Officer of the Monetary Authority of Singapore (MAS). We spoke with him about the innovative uses of machine learning and the leveraging of big data among banks and the financial system more broadly. David walked us through how the new Data Analytics Group at MAS is approaching the ethical use of data when so many financial institutions are employing new AI applications. We also discussed the need for awareness of the potential for unsupervised algorithms to either help or hinder financial inclusion. Some of our key takeaways include: One MAS initiative, FEAT, is focused on four guiding principles for financial institutions concerning the usage of data in AI innovations: fairness, ethics, accountability, and transparency.  Machine learning can be applied in wide range of financial services from insurance to wealth management, for example, by using behavioral data to lower premiums and by offering algorithm-based robo advisory services that market services to a wider swath of people. Regulators ought to ensure financial institutions understand the risks involved in using algorithms and unsupervised machine learning – are these risks acceptable? Applications of AI – artificial intelligence – will more likely augment, not replace, financial jobs of the future. The technology is likely to transform the services provided by banks and the roles of bank branches, and will alter the relationship between banks and customers and underscore the importance of data.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In this episode, we continued our ongoing series on fintech in Asia by interviewing David Hardoon, the Chief Data Officer of the Monetary Authority of Singapore (MAS). We spoke with him about the innovative uses of machine learning and the leveraging of big data among banks and the financial system more broadly. David walked us through how the new Data Analytics Group at MAS is approaching the ethical use of data when so many financial institutions are employing new AI applications. We also discussed the need for awareness of the potential for unsupervised algorithms to either help or hinder financial inclusion. Some of our key takeaways include: One MAS initiative, FEAT, is focused on four guiding principles for financial institutions concerning the usage of data in AI innovations: fairness, ethics, accountability, and transparency. <ul> <li>Machine learning can be applied in wide range of financial services from insurance to wealth management, for example, by using behavioral data to lower premiums and by offering algorithm-based robo advisory services that market services to a wider swath of people.</li> <li>Regulators ought to ensure financial institutions understand the risks involved in using algorithms and unsupervised machine learning – are these risks acceptable?</li> <li>Applications of AI – artificial intelligence – will more likely augment, not replace, financial jobs of the future. The technology is likely to transform the services provided by banks and the roles of bank branches, and will alter the relationship between banks and customers and underscore the importance of data.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 1 - Fintech in Asia: Understanding the Uses of Machine Learning and AI in Finance

In this episode, we continue our ongoing Rethinking Asia series with Louis Kuijs, the head of Asia Economics at Oxford Economics. His background includes a particular focus on China, reflecting experience in both the public and private sectors covering banking, macroeconomic, and policy issues in the world’s second largest economy. We spoke with Louis about the ongoing trade tiff between the United States and China. He shared his thoughts on the regional economic and structural effects of evolving international trade patterns, China’s path to further integrating into the global financial system, and consequences for the broader U.S.-China relationship from the trade dispute fallout.  The mood in the U.S.-China trade talks has seen some improvements as progress is being made. More broadly, the ongoing trade dispute reflects the change in American mentality; in the U.S., the narrative on U.S.-China relations has shifted from cooperation to rivalry. When measuring the near-term effects of the U.S.-China trade tiff, the impact on business confidence is often overlooked. Indeed, the effect of uncertainty could be larger than the direct impact of the tariffs via weaker exports and higher prices. Over the medium term, however, the trade dispute may have much larger effects via a global reconfiguration of supply chains and growing underlying tension between the U.S. and China which is centered on technology. While China serves as a well-known hub in the global supply chain, Chinese demand and China’s rapidly growing role as a destination for imports have been major drivers for regional trade. Tariffs will ultimately result in a net loss for regional trade partners by reducing Chinese growth and demand. Gains in trade for partner countries associated with receiving relocated production facilities, for example, will likely be overwhelmed by slower growth. Despite the U.S.-China dispute, appetite for free trade agreements in Asia remains strong. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into effect on January 1, includes greater flexibility in several provisions relative to the TPP version. Another regional agreement, RCEP, can potentially add an additional layer or extension of trade liberalization that compliments CPTPP. Over the longer term, China’s stated liberalization objectives have implicit contradictions. On the one hand, policymakers plan to continue taking steps to open up the country, further integrating China into the global economy and financial system. On the other hand, policymakers have underscored their commitment to maintain China’s current model, whereby the Party remains at the heart of economic decisions and state-owned enterprises have a central role.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In this episode, we continue our ongoing Rethinking Asia series with Louis Kuijs, the head of Asia Economics at Oxford Economics. His background includes a particular focus on China, reflecting experience in both the public and private sectors covering banking, macroeconomic, and policy issues in the world’s second largest economy. We spoke with Louis about the ongoing trade tiff between the United States and China. He shared his thoughts on the regional economic and structural effects of evolving international trade patterns, China’s path to further integrating into the global financial system, and consequences for the broader U.S.-China relationship from the trade dispute fallout. <ul> <li>The mood in the U.S.-China trade talks has seen some improvements as progress is being made. More broadly, the ongoing trade dispute reflects the change in American mentality; in the U.S., the narrative on U.S.-China relations has shifted from cooperation to rivalry.</li> <li>When measuring the near-term effects of the U.S.-China trade tiff, the impact on business confidence is often overlooked. Indeed, the effect of uncertainty could be larger than the direct impact of the tariffs via weaker exports and higher prices. Over the medium term, however, the trade dispute may have much larger effects via a global reconfiguration of supply chains and growing underlying tension between the U.S. and China which is centered on technology.</li> <li>While China serves as a well-known hub in the global supply chain, Chinese demand and China’s rapidly growing role as a destination for imports have been major drivers for regional trade. Tariffs will ultimately result in a net loss for regional trade partners by reducing Chinese growth and demand. Gains in trade for partner countries associated with receiving relocated production facilities, for example, will likely be overwhelmed by slower growth.</li> <li>Despite the U.S.-China dispute, appetite for free trade agreements in Asia remains strong. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into effect on January 1, includes greater flexibility in several provisions relative to the TPP version. Another regional agreement, RCEP, can potentially add an additional layer or extension of trade liberalization that compliments CPTPP.</li> <li>Over the longer term, China’s stated liberalization objectives have implicit contradictions. On the one hand, policymakers plan to continue taking steps to open up the country, further integrating China into the global economy and financial system. On the other hand, policymakers have underscored their commitment to maintain China’s current model, whereby the Party remains at the heart of economic decisions and state-owned enterprises have a central role.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 3 - Rethinking Asia: The U.S.-China Trade Dispute

In this episode of our series on financial technology, we sat down with Katie Macc, co-founder and chief operating officer of Juntos Global, a fintech company that serves as a bridge between financial access and financial inclusion for the world's newly banked. Kate tells us about the ways technology can help solve many of the problems facing the unbanked around the world. Some of the key takeaways from our conversation include:  Lack of trust is a key barrier to getting the newly banked to use their new accounts. For fintech products to be successful, new users need to trust the financial institution, the product itself, and their own ability to use it. Socioeconomic status can play a huge role in how people use fintech. The differences between users within a country can be greater than similar groups across multiple countries. Necessity is the mother of innovation. Fintech in emerging markets has been forced to adapt to low profit margins and information constraints. These experiences could offer insights for firms aiming to fill gaps in financial inclusion in the United States.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In this episode of our series on financial technology, we sat down with Katie Macc, co-founder and chief operating officer of Juntos Global, a fintech company that serves as a bridge between financial access and financial inclusion for the world's newly banked. Kate tells us about the ways technology can help solve many of the problems facing the unbanked around the world. Some of the key takeaways from our conversation include: <ul> <li>Lack of trust is a key barrier to getting the newly banked to use their new accounts.</li> <li>For fintech products to be successful, new users need to trust the financial institution, the product itself, and their own ability to use it.</li> <li>Socioeconomic status can play a huge role in how people use fintech. The differences between users within a country can be greater than similar groups across multiple countries.</li> <li>Necessity is the mother of innovation. Fintech in emerging markets has been forced to adapt to low profit margins and information constraints. These experiences could offer insights for firms aiming to fill gaps in financial inclusion in the United States.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 1 - Fintech in Asia: How Technology can Build Trust for the Newly Banked

In this episode, we continued our ongoing series on fintech in Asia by interviewing Simone di Castri, the Managing Director of the RegTech for Regulators Accelerator (R²A).  The mission of R²A is to enhance the capacity of financial authorities by harnessing innovative technologies and accelerating promising RegTech (regulatory technology) solutions. Simone guided us through some of the biggest challenges facing financial authorities, and what technological solutions R²A has been developing to help regulators in emerging markets. R²A has so far been focused on enhancing the capabilities of financial authorities in Mexico and the Philippines to better understand markets and customer needs in data-rich environments. Some of our key takeaways include: A critical challenge in banking supervision is the time and resources required to manage and validate data collected from financial institutions; R²A is solving this using APIs that connect the central bank to financial institutions.  In the Philippines, R²A is prototyping a smartphone chat bot powered by machine learning that will enable any citizen to escalate a problem with their financial provider to the consumer protection team at the central bank. Emerging and frontier markets are a natural fit for these new tools and techniques given the importance they place on financial inclusion and resource constraints that encourage innovation.  Fast-moving fintech actors have helped spur financial authorities to be more proactive in adopting new technologies in oversight and regulation. The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In this episode, we continued our ongoing series on fintech in Asia by interviewing Simone di Castri, the Managing Director of the RegTech for Regulators Accelerator (R²A).  The mission of R²A is to enhance the capacity of financial authorities by harnessing innovative technologies and accelerating promising RegTech (regulatory technology) solutions. Simone guided us through some of the biggest challenges facing financial authorities, and what technological solutions R²A has been developing to help regulators in emerging markets. R²A has so far been focused on enhancing the capabilities of financial authorities in Mexico and the Philippines to better understand markets and customer needs in data-rich environments. Some of our key takeaways include: A critical challenge in banking supervision is the time and resources required to manage and validate data collected from financial institutions; R²A is solving this using APIs that connect the central bank to financial institutions. <ul> <li>In the Philippines, R²A is prototyping a smartphone chat bot powered by machine learning that will enable any citizen to escalate a problem with their financial provider to the consumer protection team at the central bank.</li> <li>Emerging and frontier markets are a natural fit for these new tools and techniques given the importance they place on financial inclusion and resource constraints that encourage innovation.</li> </ul> Fast-moving fintech actors have helped spur financial authorities to be more proactive in adopting new technologies in oversight and regulation. The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 1 - Fintech in Asia: Bringing New Technologies to Financial Authorities

In this episode of our series Rethinking Asia, we spoke with Frederic Neumann, Managing Director and Co-Head of Asian Economics Research at HSBC. Currently based in Hong Kong, Fred previously taught graduate level courses at schools in the United States and holds a Ph.D. in International Economics and Asian Studies from the Johns Hopkins School of Advanced International Studies. Fred guided us through the complex economic dynamics at play between China and ASEAN members.  We learned why intra-Asian trade is expected to increase as more trade agreements are signed within Asia, and how China’s Belt and Road infrastructure investment can best help Southeast Asian economies. Some of our main takeaways from our exchange with Fred include: An earlier period of fierce competition between China and Southeast Asia has given way to an era of greater complementarity with many areas of mutual benefit in the region including increased trade and tourism and integrated supply chains.  However, as many ASEAN economies now have lower average wage costs than China, supply chains are diversifying into Southeast Asia and increasing intra-Asian trade. U.S. reluctance to join the two major multilateral trade agreements in Asia is accelerating regionalization, or regional engagement and integration fueled by greater economic codependence within Asia. Chinese Belt and Road investment in Southeast Asia can alleviate domestic constraints in engineering know-how and capital availability to improve infrastructure and link markets, particularly if it steers clear of prestige projects. A rapidly aging Northeast Asia will raise labor costs and domestic savings, thus paving the way for more foreign investment to flow into relatively younger Southeast Asian economies. Across Southeast Asia, macroeconomic fundamentals remain sound overall; however, current account deficits in Indonesia and the Philippines appear most vulnerability to global threats.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In this episode of our series Rethinking Asia, we spoke with Frederic Neumann, Managing Director and Co-Head of Asian Economics Research at HSBC. Currently based in Hong Kong, Fred previously taught graduate level courses at schools in the United States and holds a Ph.D. in International Economics and Asian Studies from the Johns Hopkins School of Advanced International Studies. Fred guided us through the complex economic dynamics at play between China and ASEAN members.  We learned why intra-Asian trade is expected to increase as more trade agreements are signed within Asia, and how China’s Belt and Road infrastructure investment can best help Southeast Asian economies. Some of our main takeaways from our exchange with Fred include: An earlier period of fierce competition between China and Southeast Asia has given way to an era of greater complementarity with many areas of mutual benefit in the region including increased trade and tourism and integrated supply chains. <ul> <li>However, as many ASEAN economies now have lower average wage costs than China, supply chains are diversifying into Southeast Asia and increasing intra-Asian trade.</li> <li>U.S. reluctance to join the two major multilateral trade agreements in Asia is accelerating regionalization, or regional engagement and integration fueled by greater economic codependence within Asia.</li> <li>Chinese Belt and Road investment in Southeast Asia can alleviate domestic constraints in engineering know-how and capital availability to improve infrastructure and link markets, particularly if it steers clear of prestige projects.</li> <li>A rapidly aging Northeast Asia will raise labor costs and domestic savings, thus paving the way for more foreign investment to flow into relatively younger Southeast Asian economies.</li> <li>Across Southeast Asia, macroeconomic fundamentals remain sound overall; however, current account deficits in Indonesia and the Philippines appear most vulnerability to global threats.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 3 - Rethinking Asia: Evolving Trends in Trade and Growth in Southeast Asia

Today, we launch a new series, Rethinking Asia, as we consider noteworthy and unusual trends in Asian finance and economics. In our first episode, we sat down with Jesper Koll, head of Japan at WisdomTree, a global asset manager. In our conversation, Jesper explains in depth the history and forces behind Japan’s distinction as a safe haven for global investors. He explains why assets like the yen and Japanese government bonds rally during periods of regional or global turmoil. Some of the key takeaways from our conversation with Koll include:  The Japanese yen has been known for some time as a safe haven currency; when global investors are in risk-off mode, the yen strengthens. There are a few forces behind the safe haven status: as one of the predominant funding currencies of global financial markets, investors borrow in yen to invest in higher yielding assets during periods of calm. However, during periods of volatility, investors unwind those positions to close (pay back) open yen positions, causing the yen to appreciate. In addition, there is the market perception that Japanese asset managers (such as pension funds and insurance companies) repatriate their portfolios back to Japan during crises causing yen appreciation. However, this has been proven to be more myth than reality. The yen’s liquidity –it is one of the few deep, liquid, freely traded currencies in the Asian time zone—makes it a candidate for funding positions and also exacerbates reactions during periods of risk-off sentiment. Given the increasing importance of China to the global economy and continued restrictions on that country’s capital account, Japan is experiencing more volatility when investors react to events in China. The Swiss franc behaves much like the Japanese yen. Like the yen, the franc is a funding currency for international speculators. It acts like a safe haven asset, and appreciates during bouts of market volatility.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Today, we launch a new series, Rethinking Asia, as we consider noteworthy and unusual trends in Asian finance and economics. In our first episode, we sat down with Jesper Koll, head of Japan at WisdomTree, a global asset manager. In our conversation, Jesper explains in depth the history and forces behind Japan’s distinction as a safe haven for global investors. He explains why assets like the yen and Japanese government bonds rally during periods of regional or global turmoil. Some of the key takeaways from our conversation with Koll include: <ul> <li>The Japanese yen has been known for some time as a safe haven currency; when global investors are in risk-off mode, the yen strengthens.</li> <li>There are a few forces behind the safe haven status: as one of the predominant funding currencies of global financial markets, investors borrow in yen to invest in higher yielding assets during periods of calm. However, during periods of volatility, investors unwind those positions to close (pay back) open yen positions, causing the yen to appreciate.</li> <li>In addition, there is the market perception that Japanese asset managers (such as pension funds and insurance companies) repatriate their portfolios back to Japan during crises causing yen appreciation. However, this has been proven to be more myth than reality.</li> <li>The yen’s liquidity –it is one of the few deep, liquid, freely traded currencies in the Asian time zone—makes it a candidate for funding positions and also exacerbates reactions during periods of risk-off sentiment.</li> <li>Given the increasing importance of China to the global economy and continued restrictions on that country’s capital account, Japan is experiencing more volatility when investors react to events in China.</li> <li>The Swiss franc behaves much like the Japanese yen. Like the yen, the franc is a funding currency for international speculators. It acts like a safe haven asset, and appreciates during bouts of market volatility.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 3 - Rethinking Asia: Japan’s Complicated Role as a Global Safe Haven

In the fourth episode of Rethinking Asia, we interviewed Matthew Goodman, the William E. Simon Chair in Political Economy at the Center for Strategic and International Studies (CSIS). At CSIS, he leads the Reconnecting Asia program, which tracks how infrastructure is shaping economic and geopolitical realities in Asia. Our discussion touched on Asia’s huge demand for new infrastructure and the complex geopolitical tensions among regional and multilateral actors. Matthew addressed how countries deal with the risks associated with these large projects and unpacked the role of national strategy, including China’s Belt and Road Initiative. Some of our key takeaways include:  The Asian Development Bank estimates that between 2016 and 2030, Asia needs $26 trillion of infrastructure investment to reduce poverty and expand growth. International investors see infrastructure projects as a source of long-term return, but often must contend with underlying issues of corruption, land rights, and political risk. While donor countries seek to lead infrastructure projects to gain commercial or geopolitical benefits, recipient countries pursue projects for growth and domestic political support. Japanese banks lead the world in infrastructure financing, but recent Chinese efforts – the Belt and Road Initiative and the Asian Infrastructure Investment Bank – are expanding trade connections and raising China’s profile in developing countries. Most global trade currently takes place via sea, but improved land-based transportation infrastructure in Asia may mean more commerce travels over upgraded freight and truck networks. To plan and finance physical infrastructure, countries also need many forms of soft infrastructure, like functioning capital markets, customs procedures, credible legal and regulatory regimes, and human capital. 

In the fourth episode of Rethinking Asia, we interviewed Matthew Goodman, the William E. Simon Chair in Political Economy at the Center for Strategic and International Studies (CSIS). At CSIS, he leads the Reconnecting Asia program, which tracks how infrastructure is shaping economic and geopolitical realities in Asia. Our discussion touched on Asia’s huge demand for new infrastructure and the complex geopolitical tensions among regional and multilateral actors. Matthew addressed how countries deal with the risks associated with these large projects and unpacked the role of national strategy, including China’s Belt and Road Initiative. Some of our key takeaways include: <ul> <li>The Asian Development Bank estimates that between 2016 and 2030, Asia needs $26 trillion of infrastructure investment to reduce poverty and expand growth.</li> <li>International investors see infrastructure projects as a source of long-term return, but often must contend with underlying issues of corruption, land rights, and political risk.</li> <li>While donor countries seek to lead infrastructure projects to gain commercial or geopolitical benefits, recipient countries pursue projects for growth and domestic political support.</li> <li>Japanese banks lead the world in infrastructure financing, but recent Chinese efforts – the Belt and Road Initiative and the Asian Infrastructure Investment Bank – are expanding trade connections and raising China’s profile in developing countries.</li> <li>Most global trade currently takes place via sea, but improved land-based transportation infrastructure in Asia may mean more commerce travels over upgraded freight and truck networks.</li> <li>To plan and finance physical infrastructure, countries also need many forms of soft infrastructure, like functioning capital markets, customs procedures, credible legal and regulatory regimes, and human capital.</li> </ul>

Season 3 - Rethinking Asia: Asia Can’t Get Enough Infrastructure

In our third episode of our series Rethinking Asia, we spoke with Andy Rothman, an investment strategist for Matthews Asia. Prior to joining Matthews Asia, he worked for 20 years in China, and now uses that experience to shape the firm’s thoughts on China from an investment perspective.  Andy helped us understand the growth and current state of Chinese domestic consumption. We discussed China’s efforts to rebalance away from investment and exports towards consumption, and what future growth will look like in China. Some of our main takeaways from our conversation with Andy include:   In 2017, two-thirds of economic growth in China came from consumption, largely because of households. Household incomes have risen by 120 percent in the past decade, compared to nine percent over that period in the U.S. Driven by smartphone adoption and non-cash payment platforms, online retail sales in China have continued to experience incredible year-over-year growth. This healthy consumer story is supported by Chinese households’ habit of saving 30 percent of their incomes ­– to pay for education expenses and compensate for a weak social safety net – and by their sunny outlook on future growth. In Rothman’s view, elevated consumer spending on housing is less likely to cause a crisis because, unlike in the U.S. housing market of the 2000s, Chinese buyers must put down a minimum 20 percent down payment and bank due diligence is quite strict. Aging demographics in China have put an end to double-digit growth rates, but real estate isn’t the ticking time bomb most predict. The government’s consistent measures to raise the minimum wage have nudged all wages higher and have had an outsized impact on the rebalancing to consumption.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In our third episode of our series Rethinking Asia, we spoke with Andy Rothman, an investment strategist for Matthews Asia. Prior to joining Matthews Asia, he worked for 20 years in China, and now uses that experience to shape the firm’s thoughts on China from an investment perspective.  Andy helped us understand the growth and current state of Chinese domestic consumption. We discussed China’s efforts to rebalance away from investment and exports towards consumption, and what future growth will look like in China. Some of our main takeaways from our conversation with Andy include:  <ul> <li>In 2017, two-thirds of economic growth in China came from consumption, largely because of households.</li> <li>Household incomes have risen by 120 percent in the past decade, compared to nine percent over that period in the U.S.</li> <li>Driven by smartphone adoption and non-cash payment platforms, online retail sales in China have continued to experience incredible year-over-year growth.</li> <li>This healthy consumer story is supported by Chinese households’ habit of saving 30 percent of their incomes ­– to pay for education expenses and compensate for a weak social safety net – and by their sunny outlook on future growth.</li> <li>In Rothman’s view, elevated consumer spending on housing is less likely to cause a crisis because, unlike in the U.S. housing market of the 2000s, Chinese buyers must put down a minimum 20 percent down payment and bank due diligence is quite strict. Aging demographics in China have put an end to double-digit growth rates, but real estate isn’t the ticking time bomb most predict.</li> <li>The government’s consistent measures to raise the minimum wage have nudged all wages higher and have had an outsized impact on the rebalancing to consumption.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 3 - Rethinking Asia: China’s Rising Consumer Class

In this episode of our series Rethinking Asia, we interviewed Kathy Matsui, vice chair of Goldman Sachs Japan. She is a prominent advocate for women in the workforce, serves as a policy commentator for Japan’s Cabinet Office and has served on multiple Japanese government committees aimed at promoting gender diversity.  Kathy guided us through the combination of factors that have led to the current gap between the high skill and education levels of Japanese women and, in many cases, their absence from full-time work. She explained how changes in Japanese government policies and society are addressing this disconnect, and why empowering women is only part of the solution to Japan’s demographic crisis. Some of our main takeaways from our conversation with Kathy include:  Various factors led to this gap between high skill and low participation: insufficient “infrastructure,” such as daycare, prevented many Japanese women from returning to work after giving birth; unaccommodating employer policies have discouraged women’s attempts to re-enter the workforce; and societal preferences have long favored women who opt to stay at home. Government efforts to improve daycare options and a marginal increase in temporary work visas have helped reverse the trend. However, improving female labor participation is just one prong of a coherent strategy that will be required to tackle a broader demographic challenge and labor shortage. Gender diversity targets are smart long term goals in the private sector. Gender quotas should be considered in the public sphere, at least temporarily, to ensure public policy decision-making processes accurately reflect the population.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In this episode of our series Rethinking Asia, we interviewed Kathy Matsui, vice chair of Goldman Sachs Japan. She is a prominent advocate for women in the workforce, serves as a policy commentator for Japan’s Cabinet Office and has served on multiple Japanese government committees aimed at promoting gender diversity. Kathy guided us through the combination of factors that have led to the current gap between the high skill and education levels of Japanese women and, in many cases, their absence from full-time work. She explained how changes in Japanese government policies and society are addressing this disconnect, and why empowering women is only part of the solution to Japan’s demographic crisis. Some of our main takeaways from our conversation with Kathy include: <ul> <li>Various factors led to this gap between high skill and low participation: insufficient “infrastructure,” such as daycare, prevented many Japanese women from returning to work after giving birth; unaccommodating employer policies have discouraged women’s attempts to re-enter the workforce; and societal preferences have long favored women who opt to stay at home.</li> <li>Government efforts to improve daycare options and a marginal increase in temporary work visas have helped reverse the trend. However, improving female labor participation is just one prong of a coherent strategy that will be required to tackle a broader demographic challenge and labor shortage.</li> <li>Gender diversity targets are smart long term goals in the private sector. Gender quotas should be considered in the public sphere, at least temporarily, to ensure public policy decision-making processes accurately reflect the population.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 3 - Rethinking Asia: Womenomics: The Importance of Female Workforce Participation in Japan

In the next two episodes of our series Rethinking Asia, we look at the issue of China’s rising debt. In this first interview, we spoke with Yukon Huang, a senior fellow with the Asia Program at the Carnegie Endowment for International Peace. A renowned expert on China’s economy and its global impact, Yukon formerly served as the World Bank’s country director for China. Yukon walked us through the recent growth and composition of China’s debt, and why he is more worried about the structural issues behind the debt than the overall level. He also highlighted several important distinctions, such as the large role of shadow banking and the property market, that make China’s debt situation different compared to that of most emerging markets. Some of Yukon’s main takeaways include:  While China’s total debt-to-GDP ratio has rapidly increased about 100 percentage points since the Global Financial Crisis, the level of debt is reasonable for an economy of its structure and nature. The surge in debt levels is partly driven by the increasing prices of property-related assets in a country whose private property market only emerged roughly 15 years ago. The primary issue surrounding the surge in debt in China is more of a structural fiscal issue than a financial one: without sufficient tax revenues, local governments use land as collateral and borrow through opaque shadow banking activities to meet obligations. Unlike other debt-fueled emerging market expansions, the bulk of China’s debt is denominated in its local currency and China’s big state-owned banks steer too much funding into infrastructure at the expense of the private sector. A balanced approach by Chinese policymakers to financial sector deleveraging will restrict speculative shadow lending while ensuring private firms and local governments can access credit for innovative projects and public services.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In the next two episodes of our series Rethinking Asia, we look at the issue of China’s rising debt. In this first interview, we spoke with Yukon Huang, a senior fellow with the Asia Program at the Carnegie Endowment for International Peace. A renowned expert on China’s economy and its global impact, Yukon formerly served as the World Bank’s country director for China. Yukon walked us through the recent growth and composition of China’s debt, and why he is more worried about the structural issues behind the debt than the overall level. He also highlighted several important distinctions, such as the large role of shadow banking and the property market, that make China’s debt situation different compared to that of most emerging markets. Some of Yukon’s main takeaways include: <ul> <li>While China’s total debt-to-GDP ratio has rapidly increased about 100 percentage points since the Global Financial Crisis, the level of debt is reasonable for an economy of its structure and nature.</li> <li>The surge in debt levels is partly driven by the increasing prices of property-related assets in a country whose private property market only emerged roughly 15 years ago.</li> <li>The primary issue surrounding the surge in debt in China is more of a structural fiscal issue than a financial one: without sufficient tax revenues, local governments use land as collateral and borrow through opaque shadow banking activities to meet obligations.</li> <li>Unlike other debt-fueled emerging market expansions, the bulk of China’s debt is denominated in its local currency and China’s big state-owned banks steer too much funding into infrastructure at the expense of the private sector.</li> <li>A balanced approach by Chinese policymakers to financial sector deleveraging will restrict speculative shadow lending while ensuring private firms and local governments can access credit for innovative projects and public services.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 3 - Rethinking Asia: China’s Economy: Debt, Financial Risks, and Structural Challenges

In the final episode of our series on the Asian financial crisis, we take a look back at key themes and takeaways from our conversations. We also discuss Nick’s recent research paper on Asian bond market developments since the crisis. Some of the key themes we review:  Most of our guests focused on the role of fixed exchange rates, foreign currency debt, and capital control liberalization. Still, 20 years later, there remain differing views on the importance of failed Asian corporate governance versus speculative foreign capital inflows in driving excessive risk taking ahead of the crisis. The region’s reaction to the crisis—notably a movement towards more flexible exchange rates and a build-up in foreign exchange reserves—led to a sea change in global capital flows, a shift some analysts consider as a contributor to the 2008 global financial crisis a decade later. Many problems previously considered distinct to emerging markets in the wake of the Asian Financial Crisis now appear to be universal. China faces a number of challenges similar to those of emerging Asian economies in the 1990s, including a rapid build-up in credit and currency management in the face of volatile capital flows. Asia’s bond markets have grown significantly over the past two decades and represent a growing alternative to the banking system. Whether these markets can provide a “spare tire” in time of crisis remains debatable, however.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In the final episode of our series on the Asian financial crisis, we take a look back at key themes and takeaways from our conversations. We also discuss Nick’s recent research paper on Asian bond market developments since the crisis. Some of the key themes we review: <ul> <li>Most of our guests focused on the role of fixed exchange rates, foreign currency debt, and capital control liberalization.</li> <li>Still, 20 years later, there remain differing views on the importance of failed Asian corporate governance versus speculative foreign capital inflows in driving excessive risk taking ahead of the crisis.</li> <li>The region’s reaction to the crisis—notably a movement towards more flexible exchange rates and a build-up in foreign exchange reserves—led to a sea change in global capital flows, a shift some analysts consider as a contributor to the 2008 global financial crisis a decade later.</li> <li>Many problems previously considered distinct to emerging markets in the wake of the Asian Financial Crisis now appear to be universal.</li> <li>China faces a number of challenges similar to those of emerging Asian economies in the 1990s, including a rapid build-up in credit and currency management in the face of volatile capital flows.</li> <li>Asia’s bond markets have grown significantly over the past two decades and represent a growing alternative to the banking system. Whether these markets can provide a “spare tire” in time of crisis remains debatable, however.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 2 - Looking Back at the Asian Financial Crisis: Asian Financial Crisis Series Wrap-up

In this episode of our series Rethinking Asia, we spoke with Ken Hokugo, head of Corporate Governance and the director of Hedge Fund Investments at Japan’s Pension Fund Association, which manages more than $120 billion in assets. Ken is also a globally recognized expert on and strong advocate for Japanese corporate governance reform. The opinions expressed by Ken in the podcast are solely his and not those of his organization, the Pension Fund Association.  Ken discussed some of the challenges that Japan faces implementing corporate governance reform. Notably, the practice of cross-shareholdings and the lack of truly independent directors sacrifice corporate success for management stability and dampen investor confidence in Japanese stocks. Ken discusses how cross-shareholding, among other practices, is entrenched due to a host of historic and structural factors. Some of our main takeaways from our exchange with Ken include:   Poor market performance among Japanese stocks suggests a failure to create value and a lack of management accountability. Combined with a refusal to heed international investor concern, this has led to a lack of enthusiasm for Japanese stocks on the part of foreign investors in the past few decades.       The use of cross-shareholding, which is common in Japan, is often cited as the poster-child for Japan’s need for corporate governance reform. Cross-shareholding refers to the practice whereby a web of companies hold significant quantities of each other’s shares, on the promise that each will vote to approve management initiatives. Holding cross-shares has origins among keiretsu, conglomerates that dominated Japan’s modern economic development. In post-World War II Japan, keiretsu used the practice to provide capital to companies involved in Japan’s re-industrialization. While the conglomerates were dissolved under government law, the practice of cross-shareholding remains, in many cases prizing management control over corporate success. The appointment of independent directors to corporate boards is relatively new in Japan. A small group of appointed “independent” directors monopolizes the position for thousands of companies and remains beholden to management in most cases. There are only a handful of reform success stories taking root in Japan. Beyond this, Ken believes collective engagement of domestic and foreign investors can help change corporate behavior.  The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In this episode of our series Rethinking Asia, we spoke with Ken Hokugo, head of Corporate Governance and the director of Hedge Fund Investments at Japan’s Pension Fund Association, which manages more than $120 billion in assets. Ken is also a globally recognized expert on and strong advocate for Japanese corporate governance reform. The opinions expressed by Ken in the podcast are solely his and not those of his organization, the Pension Fund Association.  Ken discussed some of the challenges that Japan faces implementing corporate governance reform. Notably, the practice of cross-shareholdings and the lack of truly independent directors sacrifice corporate success for management stability and dampen investor confidence in Japanese stocks. Ken discusses how cross-shareholding, among other practices, is entrenched due to a host of historic and structural factors. Some of our main takeaways from our exchange with Ken include:  <ul> <li>Poor market performance among Japanese stocks suggests a failure to create value and a lack of management accountability. Combined with a refusal to heed international investor concern, this has led to a lack of enthusiasm for Japanese stocks on the part of foreign investors in the past few decades.      </li> <li>The use of cross-shareholding, which is common in Japan, is often cited as the poster-child for Japan’s need for corporate governance reform. Cross-shareholding refers to the practice whereby a web of companies hold significant quantities of each other’s shares, on the promise that each will vote to approve management initiatives.</li> <li>Holding cross-shares has origins among keiretsu, conglomerates that dominated Japan’s modern economic development. In post-World War II Japan, keiretsu used the practice to provide capital to companies involved in Japan’s re-industrialization. While the conglomerates were dissolved under government law, the practice of cross-shareholding remains, in many cases prizing management control over corporate success.</li> <li>The appointment of independent directors to corporate boards is relatively new in Japan. A small group of appointed “independent” directors monopolizes the position for thousands of companies and remains beholden to management in most cases.</li> <li>There are only a handful of reform success stories taking root in Japan. Beyond this, Ken believes collective engagement of domestic and foreign investors can help change corporate behavior.</li> </ul> The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Season 3 - Rethinking Asia: Fits and Starts For Japanese Corporate Governance Reform

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