♪ francine: a decade after the last financial crisis, and some are predicting the next one. is looming. in 2008, the biggest concern was that banks were too big to fail. governments felt they had no choice but to prop them up, or risk major meltdown. jump to 2010, enter philip hildebrandt, former hedge fund hedge fund manager, economist, and central banker, ready to take on the lenders, strongly advocating stricter capital requirements. today on "leaders with lacqua"

," we speak with the vice-chairman of blackrock, the world's biggest money manager, which handles more than $5 trillion in assets. after the financial crisis, what have we learned? philipp: we have too much had too much leverage in the system without any doubt. when you have too much leverage, bad things happen. not only do they happen, but when they happen, things tend to be amplified. that's the key thing. we have also learned that this notion of letting the market be totally free, that governments should get out of the way, that wasn't a good idea. what stands out is banks needed much more capital than they had at the time. we had capital levels that were excessively low. in some cases, these banks were leveraged nearly 100 times. that, to me, has always been the key takeaway.

in some ways, i wish we had focused more on the capital issue, and less on all of the other things that have made it into the regulatory reform realm. francine: is there a concern now of regulating the financial crisis, and we may miss the next one? >> there is always a bit of that. we shouldn't have any illusions. financial crises should not disappear from the pages of future history books. we have to be realistic. i don't think we are over regulating. i think it's sensible to say let's take stock and pause. and that is for a much happening, certainly when you look at what is happening in the u.s. that is part of the story, not a bad thing. to see how the system settles, as i have said, we have too many regulatory initiatives. it is the multitude of these and how they dynamically interact that is complicated to predict. so i think that a sense of

pause, delivered pause is not a bad thing, but i wouldn't say that this is overregulated. francine: you love history. how did that taint your view of the world? >> for one thing, the unexpected will always happen, sooner or later. history tells you that. and we are not very good at predicting it. so what we have to think about is how do we build the system, ensure that the system is resilient when bad things happen, rather than getting into this control mindset that you can somehow eliminate all risks. francine: where you see the biggest disruption in the next 5-10 years? or china orries technology? philipp: i think it is technology on the whole. even if you asked me more broadly, technology, the way it will impact people's behavior, the way it will impact democracies, frankly, the way it is impacting media right now -- you are in the midst of this, so you know this better than anybody.

i think that technology is all pervasive in many ways. francine: is it impacting inflation? is that why inflation is so tricky to find? of all, central banking has something to do with this. there is a framework around central banking that basically emerged firmly in the mid-1990's, let's say. price stability can be maintained -- that has impacted expectations of economic agents. so that is certainly part of it. that kind of innovation around central banking is important. secondly, globalization has dampened kind of wage pressure. there's no question about that, that you constantly have new pools of labor entering the global labor market, the global supply chains. and so that have certainly made it difficult to have a wage spiral going on. and then technology certainly is another piece where the combination of technology

, competition, and integration of new economies, new spaces, new pools of labor, has made it difficult indeed for inflation to behave the way it would have behaved in the 1960's or 1970's. francine: so should we still look at the phillips curve? is broken are dead? philipp: i think maybe that's the wrong question to ask when you ask it bluntly like that. i think it's more about, how do we think these forces will evolve over time? i think it's true that prices behave differently today than they did some decades ago. probably that will not change. i think we do have -- the good news here is we have an environment where we probably don't face imminent inflation pressures, or risks for that matter. having said that, it still remains true that monetary policy has to be there as a guarantor. so i would very much hope that even if we don't get inflation for the next years, or decades,

that central banks could continue, in terms of maintaining that stability. is a very precious thing to have price stability. francine: should we worry more about deflation, a lack of inflation? philipp: my sense is that we have managed to sort of kill the deflationary psychology in a sense, for the time being. that's one of the reasons why, as we speak today, the global outlook looks pretty positive. because in a sense we have managed to reverse that fear about deflation, and that is largely frankly due to aggressive, courageous central banking, which has had some negative side effects, but on the whole, has been the right policy. francine: what do you see being the side effects of this ultra-loose monetary policy? philipp: it is essentially low interest rates, potentially for a long time to come. the question is, how will that impact savers? retirement is a big, big issue.

when a look at blackrock, two thirds of our assets are basically tied to retirement. the question of how you finance your retirement in a world of potentially protracted low interest rates is a big, big problem, a difficult challenge that i think most of our societies today face. and frankly, in most countries, government policy hasn't really responded, hasn't even in many cases openly acknowledged this challenge, that we have a major retirement problem facing us. and low interest rates don't help in the sense that if you start to think i'm not going to be able to live on my retirement savings because interest rates are low, that might just lead you to save even more. this is what is called precautionary savings effect, and it is something that is potentially very destabilizing.

the longer we have low interest rates, coupled with this them a graphic challenge, the more i will be worried about that. i certainly sense, as we talk to our clients worldwide, that retirement is one of the biggest issues we face. and we have to make sure we don't get into a situation where this becomes a crisis. francine: what is it like working with larry fink? philipp: there's a good question. [laughter] ♪

♪ francine: as a hedge fund manager, philip hildebrandt made swissrk amongst the elite. his ambitions ran higher. he joined the banks central club, at age 26, the youngest snb.dent of the his term ended two years later for a trading scandal involving his then wife, leading to his resignation. bank of england said, he is a man of total integrity, extra ability, and most part of all, courage. such people are rare.

his country will miss him. hildebrand believes courage is having courage to act in the face of adversity. itlipp: the rescue of ubs, was a very difficult moment. it went against everything we believed in, yet we knew we needed to do it. we knew it would create tremendous anger in the population. that was clear. of course it has turned out that way at a global level. that it would take a long time for banking to redeem itself. so we knew the consequences were significant, and yet we had the that we had no choice but to proceed. the other one, obviously, was the introduction of the minimum rate. a difficult day.

do you remember the conversations? something had to be done. philipp: we had done conversations about what it would look like. we had engaged with the bank to study some swap operations. we never told them we were prepared to buy the assets or take them over, so we were well prepared. but the actual moment i remember very well was breakfast at my apartment at the time in zürich, when the ceo and chairman came by, and basically told thomas jordan was there at the time, myself, and the head regulator that they needed help. that was a clear, decisive moment. from then on, the plane went into action. and that was a tough moment, because knew we had to do it. would be thenew it -- thing to do in many ways. francine: talk to me about the capping of the franc to the euro. were there other possible scenarios? philipp: this has been building

up for weeks if not months, so we have time to look at different scenarios. we also had a history. the snb and the country have faced similar circumstances in the past. we had a great team. we had not just a board, but quite a few experts economists work out everyo possible angle to every possible scenario. by the time we triggered it, i felt that we had done all the possible preparation we could. have done as an institution. francine: that at the time was a big risk. taker by nature? philipp: one of my mentors told me early on "sometimes not acting is the greatest risk." with the markets being what they are, we had to come in suddenly very suddenly and very aggressively, which we did, but reality is that behind this

there was nothing aggressive. there was due consideration and extensive studying and scenario analysis. francine: it was bold. philipp: it was reasonably bold. it was also important that it had the credibility of the community of central banks and governments, to some extent. that in many ways was my biggest worry, that we would be seen by some of our principal partners worldwide as doing something that wasn't quite right. and of the things that i spend one an enormous amount of time to, to make sure robust, analytics are to make sure it wasn't something we would have to explain. these dimensions were incredibly important. francine: did you confide in any other central bankers? philipp: that's a delicate question. what i would say is that one of the unique things about central

banking, and it is certainly one of my greatest privileges that i've experienced professionally to have experienced this is the collegiality and trust that develops in the central banking community. being part of the club of governors is a, is a great privilege. you really have a community of colleagues that you can trust. there's a way you can learn from each other. you can discuss complex issues. that is quite unique, and to me, was one of the greatest privileges really of being part of that club. francine: what was it like the day that the franc capping was announced, not being beholden to the euro anymore? philipp: it was not a permanent change of monetary policy regime. so the fact that it would be at some point, that it would come to an end, was always obvious, and as it was obvious that it had to be premised on europe somehow not falling apart.

francine: will europe stay together? philipp: yes. francine: you are a firm european believer. philipp: in this world of globalization, the only way for europe to be influential today is to have a strong common voice. francine: so when you decided to resign, how difficult of the decision was that? january 9, 2012. philipp: it was tough. i loved being a central banker. serving the central bank, my country, is certainly the greatest privilege i've ever had professionally. but ultimately, public service is not about yourself. it is about the institution you serve, the people you serve, or the country you serve. and in that context, it was the right decision. because it needed, the circumstances were such where utmostlity was of the importance, and the best way to

preserve the full range of actions in a difficult environment, remember, this was the tail end of the crisis, things were uncertain. the euro crisis was still in full bloom. it was very, very important that there were no questions around the leadership, so it was the right thing to do for the institution. it was the right thing to do for the country. it was a painful thing to do for me. francine: talk to me in real terms, what is a robot advisor? and i going to have a robot as a boss at any point if i work for blackrock? ♪

♪ francine: after leaving the swiss national bank, philipp hildebrand went to work. his repetition precedes him. his job at blackrock has high expectations, and his larger-than-life. his company manages more than $5 trillion in assets, making him one of the most influential figures in the financial world. francine: philip, what is it like working with larry fink? philipp: there's a good question. [laughter] philipp: larry is a bit older than me. i try to keep fit, but traveling with him is a workout. francine: is he demanding? philipp: he is demanding, yes, but no more than he is on himself. he has coined this phrase that we all have to be students of the market. there no excuse for anybody at blackrock not to be a daily

student of the market. i think that shapes the culture very much at blackrock. this relentless, never be satisfied, always know that the world moves on, you have to learn every single day. so we have a lot of initiatives around internal programs and academy, where we really force everybody and encourage everybody to live that motto. if people can't do that or don't want to do that, then they are in the wrong place at like blackrock. so the culture that he carries very much runs throughout the firm. francine: what's the question you get asked most internally? , and by your clients? philipp: well, you often get asked, what's it like to work with larry? [laughter] philipp: i think on substance for a long time since the crisis, it was about the future of europe. the other question is how do we operate in slow interest rate environment, particularly if you extend it for a long time?

what we believe is we are in a sustained economy at the moment, but we also think we will see a kind of cap on interest rates and probably growth rates, that we are structurally and a lower growth environment going forward for quite some time. francine: how does blackrock deal with it? philipp: first of all, we have to be relentless students of the market. we invest a lot of resources and time building our investment institute, providing insights to clients. we have found new ways to share our analysis with our clients. basis.rmanent we have to be innovative around using technology brand-new products, product innovation. intechne: are you a fa company or an asset manager? philipp: certainly, but i think we are more than an asset manager. i believe we are at platform.

we have said publicly that our ambition would be five years from now, we would have a third of their earnings derived from technology empowered, or technology driven product services. francine: talk to me in real terms, what's a robot advisor? and i going to have a robot as a am boss at any point if i work for blackrock? philipp: no. i think the answer is, you will interface, or if you are not a client -- we don't go directly to clients at the moment -- but throughout distributors, they will have technology tools that will make it easier for them to deal with their clients, work with their clients, and bring value to their clients, and we want to be that platform for distributors. you will also see that in your products, in a combination of technology-driven investments

and sort of human-driven investments, will increasingly be visible. this whole distinction of saying we have technology and people, i suspect that's not going to be the world we live in 10-15 years from now. that the reality is there will still be important roles to play by people, analysis, judgment, learning about the markets, experience, history, all of these things will continue to be important, but people will be empowered by technology in many ways, hopefully to the benefit of our clients. francine: you definitely have an advantage because of size and scope. do you believe there will be more consolidation amongst your investors? philipp: look, i think there will be a lot of companies that disappear. that doesn't necessarily mean there's going to be a lot of m&a.n some of these companies might simply not be worth buying. the client will simply migrate away from these companies, and buy other products from a different company. it doesn't necessarily mean consolidation, in the sense of

the corporate idea, but i do think we are going to see a lot of change in the asset management industry. and those companies that cannot respond to the need to change will change. it's easy for a client to change his or her asset manager. ♪ francine: outside of work, a passion for sport. in his youth, hillebrand was a swimmer who nearly qualified for the 1984 olympics. days he's a skier and rock climber. it offers the escape from the day job. he draws parallels between sports and business can also help you develop skills as a leader. philipp: what it teaches you, hopefully, is discipline, stamina, and staying on top of things. every day, it is not just about a great effort today and then i slack off. it never ends. it is sort of this ability, this you neverf saint

really win, you just kind of go to the next challenge. i think that is so heavily embodied in our culture of blackrock. at the top, larry himself talked about it. in that sense, there is an analogy. i climb, ski, spend time in the mountains. i like to bike. francine: is that when you think about the world? philipp: mmm, it is more that i don't do anything else other than climbing. the beauty about climbing is you don't have time for a form of meditation. you don't think about anything other than the next step. i find that to be a refreshing exercise in a world where you are constantly being bombarded everyday, another email, another message, another call. francine: what part of history into the most? are there parallels, i don't tudorif it is with

england, or anything you see with parallels that move through today? philipp: we can learn a tremendous amount from history, from the mistakes that have been made in european history. europe has terrible, terrible incidents, and i think repeatedly to learn about that, to teach our children. we recently took our kids to auschwitz as a way to make sure this historical sense of how things can go wrong in europe, it's important to pass on. francine: is there a shortcoming in human nature that frustrates you when you do business? philipp: i struggle with people who don't have a framework on how they think. i find it important for people to develop an ability to think about the problem, no matter what the problem is, in a reasonably disciplined way. i think erratic thinking leads to erraticad outcomes. francine: where do you see yourself in five years? philipp: i used to be with a couple others, mark carney. we always used to be the

youngest in the room. i noticed recently that in the last year or so when i'm standing in the elevator on the way up, new york, offices, i am realizing i am amongst the oldest. so i am beginning to think about that. i can certainly imagine being at blackrock. i think we, we have a tremendous five years ahead of us, in terms of change, challenges, and other than that, i have learned in life, you have to be prepared for surprises, and then react accordingly. but i can certainly imagine being at blackrock talking to you about how things have changed five years from now in asset management. francine: hopefully more than five years. thank you so much. ♪

>> we are in the middle of the asian trading session. markets.o bloomberg .ealing with debt and a dispute they say they will not loans.timate bad the security council meets defiesw and bitcoin

gravity. probably a it is bubble. bitcoin in aabout moment and we have some exchanges looking for more because of the demand for ofrything with the stretch the operation of a lot of these exchanges. looking at a stress test. checks on thes of markets across the region. with sophie.n >> the equity rebound is