Newscasts - Reuters interview with Wells Fargo CEO Charlie Scharf 1

Eastman Kodak

05/11/2025 18:49

Click the following link to watch video: https://share.newscasts.refinitiv.com/link?entryId=1_4q00oe4b&referenceId=1_4q00oe4b&pageId=Newscasts
Source: 'Reuters - Business videos'

Description: Wells Fargo CEO Charlie Scharf is interviewed by Reuters U.S. Finance Editor Lananh Nguyen at The Clearing House annual conference in New York.

Short Link: https://lseg.group/4qALBe6

Video Transcript:

>> It's good to be with you. I would be remiss as a reporter if I didn't ask about the topical news of the day, which of course is the mayoral election yesterday. I feel like we're getting lots of takes from people on Wall Street. I'd love to hear if you have any takeaways from the election. >> Don't read too much into this, but I was in Florida yesterday and the day before and I was in Texas two weeks before that. I do get around the country. Look, we'll see, you've got to ultimately give people the opportunity. People make choices at elections, and people get elected, and I think we owe it to our elected representatives to give them an opportunity to be able to turn up and hopefully do an amazing job. And New York City, we've been around for a long time. New York City has been around for 400 years. BNY has been around for 241 years. We've seen a few mayors over the course of time. And I think one of the things that we've learned is that you try to work with government to try to improve the lives of the people in the city, to maximize the opportunities for businesses to thrive. And working together is generally the right answer. And I will say, one of the things that I've been struck by in places like Florida and Texas all joking aside, is that they have a real focus on public-private partnership to be able to bring companies and the public sector together to create good outcomes. And it's a story that we see here in the US very much at the moment, Leo, but we also see it around the world, which is an increasing recognition that growth really matters. If you can create a growing economy, vibrancy, and attract people and capital to create that growth. That allows for prosperity. That allows for income at the government level that then allows for choices to be made, social programs, other benefits, difficult things, expensive things. We don't have any of those things unless you have growth. And I think countries and states that recognize that try to line up the right pieces to create the conditions for that growth, they attract capital, they attract people, they attract companies, that creates prosperity, that seems like a winning formula to me. And countries and states that don't respond in that way, they risk being left behind. >> So last question on this, I promise, you talked about this collaboration between public and private partnerships. Do you have any message for the new mayor or any work that you'd want to do with the mayor's office that has been successful in the past? >> Yeah, 100%. We'd love to be able to work with the new administration as he puts his administration together to try to identify ways where we, as the bank of New York, can be supportive. To the administration to be able to create growth, create prosperity for New Yorkers. We want the same thing. We want New York to be an amazing city which attracts people and capital and can create prosperity. The prosperity needs to be broadly shared. But at the end of the day, unless we have a top talent and it's a talent destination and capital and great companies, it'll be very hard to be able to achieve those things. So we are ready, willing, and able to do it. Just yesterday, as an example of what that means in practice, we announced a public-private partnership between BNY and the largest public university in Florida, University of Central Florida, just outside Orlando, we happen to have a large office there, over 2,000 people. We just opened a new office there, and that was an example of us. We have faculty members teaching a curriculum on campus for credit to try to create better pathways from the classroom into the job market. And that's a great example of public-private partnership right there, we literally launched it yesterday, and we stand ready. We have a similar program conceptually in Pittsburgh with Carnegie Mellon, where we also have a large office. And we have a large office here in New York, but in New York, we don't have such a thing. So we stand ready. We'd love to be able to collaborate with people who want to collaborate with us. >> So you mentioned this incredible history of BNY as a 241-year-old bank. I was going to say 240, but don't want to shortchange you there. Obviously, Alexander Hamilton is one of the founders, but it also has a unique position in Wall Street from the other major banks there as more institutional focused. I know you come from a background of spending decades at Goldman Sachs. I'd love to hear more about what that transition was like going from Goldman Sachs to BNY and what you think makes BNY unique. >> Well, they're both terrific firms. There's no question about that. BNY has been around for a long time, but Goldman Sachs has had a long, successful history on Wall Street. They're very different firms, and I have been the beneficiary during my career of having done a bunch of different things over time as well. So I grew up in trading. I used to run a fixed income trading desk, and then I have done various things. I've been a treasurer, Chief Risk Officer, run a region an operations organization. And so transformation and change and accumulating different skills and experiences has been the thing for me. And what BNY has represented is the opportunity to put all of that to work. And we're a firm that provides these incredible services, these market leading platforms. We're world's number one at so many different things. We're the world's largest securities lender, the world's largest collateral manager with a number one custodian, $57 trillion worth of assets under custody, to the theme of the clearinghouse, we make $3 trillion of payments every day. We have a $2 trillion wealth manager, a $350 billion ultra high net worth wealth manager. We have $3 trillion of wealth assets on our wealth management platform. So we have all of these real capabilities and one of the things that we hadn't done as well is delivering them to clients properly, so that's been the subject of a lot of work that we've been embarking on over the course of the past few years. But we use history and culture also as a recruitment tool and as an engagement tool for our people. It's pretty cool to be part of a firm that was founded by Alexander Hamilton. There's actually now at the forefront of innovation with AI and digital assets and technologies like that. So this combination of history relevance, strategic importance to the financial system coupled with innovation is a pretty fun combination of different things. >> And I really want to hone in those two areas, these very buzzy sectors in finance right now, which of course is digital assets and AI. So we can take them one by one. I'm going to try not to spend too much time on Blockchain, which is something I cover a lot, but I think it is fascinating, especially BNY perspective because the bank has been really ahead on Wall Street of exploring how Blockchain and digital assets can change financial services. It was one of the first banks to explore custody a few years ago before this was as fashionable thing to do and when there was more regulatory uncertainty around it. So I'd love to hear well I think that also coincided around when you came on as you were elevated a CEO. What was behind that decision to take that risk on to move further into the Blockchain space? >> Well, if you just step back, what is the job of a leader? We had a meeting this morning the 500 top leaders of the company and somebody asked me a question along the lines of, gosh, how do we divide our time between being amazing today and running an amazing company and then also thinking about innovating for the future. I think the answer to that question is really the same as the one that you just asked. I think it's the job of all of us leading organizations of any kind to try to make sure that we are very, very focused on the present, execution, doing a terrific job, delivering for our customers. At the same time as a leader, you have to be peeking over the horizon, what might come next? What are the things that are either great opportunities or great disruptions and never fall into the trap of sticking one's head in the sand. And if you look at all of the stories of big corporate disruption over time, there were often warning signs. That came before the great disruption. The famous Kodak example, they knew everything that they needed to know. Heck, they invented the thing, the digital camera, essentially, the technology to be able to capture digital images, and they essentially saw it as disruptive and they buried it. And there are plenty of stories like that. And so if you have a vantage point, which we clearly have to see opportunities over the horizon, we've got to be thinking about, well, what if what if? You place some bets and you have to size them appropriately and you don't want to have to bet the farm on everything that may or may not come to be but that's how we thought about it with digital assets. We saw this is an interesting technology to the point that you just made Leo about the block chain. What if let's be a leader and play for the optionality of what if this turns into being a real thing? It was early days, you didn't know. Even today, maybe we don't completely know, but having invested early gave us an advantage and guess what happened. Firms that really were very passionate about the topic, they saw us as open minded. Then when they were looking for banking partners to do all other things with traditional things that we do, they were like, Well, they seem open minded, they get it. They're not closed to the idea. Let's partner with them because we need the traditional services and it seems at least that they'll be open to the other things that we do. That's been actually a great source of business for us. Same thing with AI. A 2.5 years ago, I remember watching it was right at the beginning of 2023, very shortly after the release of Open AI, hat GPT version one. I remember watching the video of Elon Musk narrating the launch of Autopilot 12. If you haven't seen that, you have to put yourself back in the moment, but this was 2.5 almost three years ago now and he narrates the big change that occurred between Autopilot 11 in the Tesla car and Autopilot 12. Autopilot 11 was entirely a rules based autopilot. They basically taught through a series of rules. You get to a stop sign, you apply the following brake and then you do this and this if you're going to turn left or right. It was all rules. And you can just imagine to teach a car to drive based on rules. You needed millions of lines of code and increasing complexity. Every time you want to add sophistication, you had to need more lines of code. It was just something that was very old school way, I would say of training. And they basically junked it with Autopilot 12, instead, they just taught the car to drive by watching millions of hours of video, which they had because they had been forward-thinking enough to record all the drives, which has been a feature of Tesla since the beginning. As a result, they taught the car to drive using AI and the technology of five years before didn't allow for it, but the technology of that moment did. That to me was just okay, fine. So we're going to be able to teach AI to basically do most things over time. It'll be a maturity curve and we just decided it was going to be incredibly important to us and we've invested. Again, we've tried to really lean into something that in that case, we felt was going to be completely inevitable. >> And we'll get to AI and Eliza and the work that BNY is doing there. But with Blockchain, I know that the first products were around custody or being able to hold crypto assets for other clients. Obviously, there's been a lot of progress recently on tokenization or being able to take traditional assets and put them on the blockchain. As someone who works so much in risk, how do you weigh risk innovation, especially when it comes to something like custody and deciding which assets you're going to start working with and which ones you want to stay away from right now? >> Well, all innovation has risk associated with it, I don't mean to be pithy, but to not innovate is very risky too. I think that mindset is one that we breathe in. You've got to innovate in a smart, sensible way. You always have to have guardrails around innovation. It doesn't matter if it's AI or digital assets or anything. You don't want people to go absolutely crazy, especially not in a regulated firm. But it is important to create a sense of risk as a partner to innovation, and that's how we've organized ourselves. Our first line teams, our business, commercial teams, they work very closely with risk in designing what we're going to do because you want the risks mitigations and guardrails built in. You don't want to be some afterthought. You want the best type of product development is one that inherently includes the risk elements to it. >> And so that's a philosophy, I think that we increasingly try to embrace in the company. But I think about digital assets as really covering three different frontiers, and this goes to the talk about choices. First of all, there are groups of assets that don't enjoy high mobility in the financial system. Maybe they don't operate 24 hours a day. They're not 365, maybe there's batch process associated with it in the background. Cross-border things can be clunky. And so this whole topic of how can Blockchain improve the mobility of money and assets. And that's bucket number one for me. And there are plenty of examples, maybe more true here in the US than in some other countries, where we've created inefficiencies in the system as a collective community of the financial services industry, and it therefore creates a big use case for digital assets because it's like, Hey, you know what? There's not a ton of theoretical opportunity for doing it, but because it may be the market closes at five, when you want to trade at nine o'clock, that might be difficult in traditional rails. So there are plenty of examples of that. Moving money is one of them because moving money is not a 24 hour instant payment 365 thing in the US. It is in some other countries, but we've created an opening for digital assets to be able to succeed in the money movement business in the United States because frankly, have a lack of innovation that had occurred in the course of the past 10, 15 years, whereas there are other countries that I think that have innovated more rapidly in faster immediate payments base than the US has, and that's a pity. It's not too late, but we should really get on that if we want to make sure that traditional money movements continue to dominate in the financial system in the next 10 years. So mobility of assets is bucket number 1. The second bucket is assets that are clunky in the traditional financial rails. Loans are not really fully adopted into digital automated ways of settling. Settling a US equity is pretty clean and easy. Moving money as long as you're doing it within the appropriate hours is pretty clean and easy. But settling alone, moving alone from A to B, me novating it to you, that's a messy business. And so that's an example, real estate is another, physical commodity is another. Those are examples of assets that don't really have a belonging. They exist on the side of the financial system, not maybe in the heart of it. So they're very ripe for technology, which is a much more multidimensional ledger, much easier to bringing them on board, bringing other assets on board would be, I would say bucket number 2. Then bucket number 3 is if you're going to operate in more of an on-chain world, you need an on-chain currency. That's where stablecoin represents, I think, the answer to that question because for different reasons, Bitcoin and Ethereum, they have volatility associated with their value, and it's very awkward when you're trying to buy or sell something to be using a currency for payment that doesn't in fact have a stable value. So having a stable value currency on chain for payment, is sensible. Again, if the US dollar rails were instantaneous fully promulgated everywhere, then you could use a digital representation of that same thing on chain, but that's not the case, so that's created the opening for stable coins, and so they live in this third bucket as a means to enable the other two. That's how I think about digital assets, and I suspect the world will play out in that way. I think the message to traditional financial services firms including ours is make sure that we are innovating not only with digital assets, but also in the traditional rails so that we don't get completely overrun by a new digital asset ecosystem. >> So I know you've declined to answer on this before, but would BNY explore or launch its own stablecoin? >> So I do get asked that question a lot. We're in the business of enabling other people's business models first and foremost. And so we didn't and I didn't avoid the question. I just said I don't love the idea of us having to launch our own stablecoin. I would much rather be in the business of providing capabilities to enable other stablecoins to prosper because I think that's the DNA of our company. And so if you will, kind of rails on which other people's stable coins are built. But, you know, we don't say no to anything. The other thing is, what about companies who want their own stable coin? For use inside their own books and records, but they don't have the scale to want to build one, and maybe for some reason or another, they don't want to use somebody else's. Maybe they would want to use a white label technology from us, so that's something that we also are quite open to. We're in the enablement business. That's what our platforms and businesses are about. They're about enabling our customers, we've got a lot of these other stablecoin operators and issuers who are very significant customers of ours, and we're very happy and proud to support their businesses. We get to support them with all the other things that we do payments, custody, asset management, on ramps, off ramps, and being this bridge between the digital asset rails and the traditional rails is a good place for us to be. >> I think the bigger question too, when it comes to blockchain, is fundamentally it's going to change the financial plumbing of the country? Is this just going to be a different use case or a different form of payments or is it going to actually change the entire undergirding of the financial system? I know someone like Jamie Diamond in the past who's been skeptical of blockchain or at least Bitcoin, recently has said, Yes, I think tokenization is real, but might not have the biggest ramifications that some people think. I'm curious what your view is. Is this going to be underlying everything 10 years from now? Is it going to still be somewhat limited in its scope? How are you viewing that? >> I don't think anybody knows the answer. There are different people coming from different perspectives who have reason to want to argue that one thing should be the case or evangelize one outcome versus another. If you go back to the first principle of it, what is it? What it is is a technology, so if you look at basic examples, not everybody uses spreadsheets, but spreadsheets are one way to create calculations and outcomes. There are plenty of other ways to maintain numerical information and inputs and outputs. And so spreadsheet is not the only one, but it's a commonly used tool because it's very fit for certain purposes, especially on a desktop. Um, but you don't essentially create some massive compute cluster just using spreadsheets in order to be able to calculate outputs. So if you think about it as a technology, then the answer is, okay, where it best is solving a problem and where it is most fit for purpose for that outcome. When I look at an equity trade or an equity settlement, very fashionable at the moment to say, Oh, great, let's create token representation of an equity so that so customers can also use that. In reality, it's a shadow instrument. That's not really solving any problems that aren't solved. Equity trading is incredibly efficient, it's incredibly cheap, it's very high volume, it's actually more expensive to trade it in other forms because there are more people trying to extract rent out of the lifecycle of the token.Spo sWhen I look at that, I'm like, I'm not sure it's really solving a problem. Um, and where there isn't a problem to be solved, at some point, people start to realize that they're paying for a bit of a novelty factor. Having said that in other parts of the financial system, like I said, assets, there is actually an inefficiency waiting to be solved. And so I think the calling again for the financial services industry is if we think that the way certain things happen today is actually the right way and a better way for some reason, and make sure that there is the appropriate mobility, 247, portability, et cetera. Because otherwise, if the use case of tokenization and digital assets is genuinely better, you should assume over time it should win out. >> So let's talk the other massively transformative technology, which is AI. You already brought up how BNY has been exploring this the past couple of years with Eliza, which is the AI platform, the company has developed. I believe it's 98% of employees have been trained on it. 99 now. Almost 99% get to that last 100% soon. Yes, there are two ways to get to 100% actually on something like that. But yes, th at's exactly right. So why did you decide on Eliza as this first major AI push for BNY? Maybe you can explain a bit what Eliza does and how it's changing the company. >> Sure. Well, Eliza was the name of Alexander Hamilton's wife, so that's where the name comes from. But the strategy, which we've really been embarking on now for 2.5 years, was a point of view, which I think we were right on, but it was a bit more of a bet at the time. World moved so quickly in AI, it's hard to remember what things felt like 2.5 years ago. But it was a bet that multi agentic was going to be the way to go. Again, that was a little bit of a calculus and one that you have to test the thesis very regularly to see if it's evolved. But we made the bet that the future of AI was going to be multi agentic and secondly, that there weren't going to be in the early days uh, any real good providers of horizontal multi agentic platforms that you could be multi agentic in a vertical way that is locked in with one of the AI providers, and you could live in their ecosystem, and you could use their agents exclusively to solve the problems. But they would be a bit more domain centric. So if you're going to use Salesforce, they've got wonderful agents, agent force and it's terrific set of products, but you live in that world. And there are many other providers like that. It's true for Microsoft, it's true for Google. And really all of the other providers. But if you wanted to avoid being stuck in one of those beautiful walled gardens and actually wanted to be more horizontal, then we wanted to have our own horizontal platform in which we could plug in all of those other agents and those agents would be able to operate in our ecosystem, and so we would be able to take full advantage of other people's agents, but we wouldn't be confined to just using either one set of agents or to have a series of different walled gardens that didn't connect and talk to each other, which we saw as a potential risk. Hence the strategy and with that as our backdrop, we've collaborated very deeply with a lot of the other AI firms in order to be able to come up with the execution of our strategy and joking aside about the 99% of people who've done the initial prerequisite training.