There are also some other key changes in banking system after the Great Crash. As mentioned in the 1st approach, changes in financial regulation also includes (Deutsche Bank research, 2009)
· Wider capital buffer is required
· Complex banking products are becoming less popular due to stricter rules for both investors and issuers. So, traditional and simple products take a step ahead
· Securitisation is no longer a winning point since banks have to have “ more skin in the game”, which means the whole process will be costly, investors with securitisation will have bear higher charges
With those changes, banks should find it hard to boost its profitability, therefore, it is expected a slow growth in post-crisis period
Another change is that the state will be back as a leading role in financial system after liberalisation and privatisation. In addition, global trend in banking will be slow down, in reverse, local or domestic direction.
The effect of those changes may not have a large impact in banking industry in short term due the inelasticity in demand. However, banks will face a clearer consequence.
The effects of the Great Crash 2007 still remain somehow to the world economy. According to Pwc’s 15th Annual Global CEO survey (PriceWaterhouseCoopers, 2012). It is predicted that 2012 is pretty gloomy for the world economy (48%). Particularly, 80% CEOs are worrying about the world economy’s unstable development, 64% about capital market, 66% about government reaction against financial deficit, as well as foreign exchange market.Emerging markets takes an important role as a source of growth for the CEO compared to developed countries. However, it is expected a low growth in both emerging and developed countries J.P. Morgan Fund Chief Market Strategist David Kelly mentioned that Europe is far away from the end of the game.
In general, the world banking and financial system is still in grey after the Great Crash 2007
In general, the world banking and financial system is still in grey after the Great Crash 2007
