1 thought on “What will drive the future of banking?”

  1. Posted 08/04/2013 at 09:19 | Permalink

    Many of the regulatory initiatives designed in response to the financial crisis and limiting the size of banks and their operating scope are unlikely to achieve their goals. This would not be surprising at all.

    A very real source of change will come from the future direction of banks that failed across Europe and were bailed out through state support in form of capital, liquidity and guarantees. These banks gradually are evacuating ‘business space’ by quitting product-lines, markets and client segments. As they do that, other nimble players will move in and these erstwhile giants will lose power and influence. That would be interesting to watch.

    In broader Asia, Africa and Latin America, there is a great demand for straightforward financing – corporate loans, trade finance, cash management and basic merchandise related risk management poroducts (rates and fx). Many of the banking giants that failed will find tackling that territory hard – they have become so used to relying upon financialised markets, i.e. trading ‘derived’ transaction flows rather than primary trade and manufacturing. Their systems, processes and personnel are geared towards that. When the hand of the state withdraws they will face enormous dificulties and may will fail. Cyprus was just a foretaste and a tiny one at that.

    The moral hazard is in play now.

Comments are closed.