Member of the Board Sinikka Salo
9th Annual Bank of Finland/CEPR Conference co-organized with the Federal Reserve Bank of Philadelphia: "Innovation and Intellectual property in Financial Services"
Helsinki 16, October 2008
I am very pleased and honoured to welcome you all to Helsinki, and to this CEPR and Bank of Finland joint Conference "Innovation and Intellectual property in Financial Services". This annual event takes place now for the 9th time, which may also be regarded as a proof of fruitful cooperation between our two institutions – and involving this time also the third party, Federal Reserve Bank of Philadelphia. We at the Bank of Finland appreciate highly the work of CEPR's network of researchers and its cooperation with the central banks, and I am happy to confirm that we at the Bank are committed to maintain and foster this cooperation also in the future. As you know we have attempted to alternate the CEPR/Bank of Finland conference themes between macro topics and financial markets topics. This time the topic indeed goes to the core of modern financial markets – and due to current financial turmoil the topic is ever more exciting and challenging. For me, at least three questions from the policy perspective are relevant: The first worry relates to risk financing – necessary to new innovative investments. How will it survive and develop further in current turmoil in financial markets with (too) high risk premium? What is the role of central banks and innovation policy makers? What are the tasks of central banks as they influence on the structure of the financial markets in fostering innovation friendly environment? Should government innovation policy be contingent to financial market frictions? Should for example more public funds be channelled via R&d subsidies when financial markets are distressed? The second issue relates the first one, and thus to the character/definition of financial innovation. Is it so that financial innovations so far have been too heavily focused on finding tools for short-sighted competition between financial institutions – and in this way resulted in destabilizing markets – rather than designing better and more appropriate financial services for e.g. to finance R&D and innovations in real economy. How to set incentives to direct financial innovations more to this direction? In particular, we do not know yet how patentability of business methods affects the incentives to innovate, not to mention how it changes the composition of R&D in financial services. Does patentability induce financial institutions do more “stabilizing” or “destabilizing” innovation? The third topic relates to incentives for R&D in payment systems. Take for example, SEPA, Single Euro Payment Area. We know that SEPA, as a common cross-border payment system is crucial for the internal market in the EU and a good start. But how to assure that there will be enough R&D to guarantee continuous improvement within the system? This issue is inherently linked to the delicate intersection of standard-setting arrangements such as SEPA and intellectual property rights. The goal of standardization is to promote the use of innovations adopted as standard whereas intellectual property aims at stimulating innovation by giving its owner a right to exclude others from using the innovation. It is not a trivial task to strike a balance between these sometimes opposing goals. Finally, last but not least, I should like to refer to various papers to be discussed in the conference, and which deal with a very important European policy issue, notably the papers dealing with the question: should business methods be patentable also in Europe and what would be the consequences for European Financial markets? For example these kind of important topics are on the current agenda of policy makers and therefore make the seminar and papers to be presented highly relevant and topical from the current policy perspective.
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I am proud and happy to declare the seminar open, and on behalf of the whole Board of the Bank of Finland, I wish your conference the best success.