The global regulatory environment is in flux. How markets will look when the legislating is over — and how accessible and competitive they will be — is far from certain.
Bankers fear unintended consequences will hamper their bosses’ ability to do business, generate profits for shareholders and continue to employ them. Perhaps the time has come to embrace change — however parochial it might be.
Quite understandably, bankers fret constantly about how incoming regulations might hamper their businesses. The emerging regulatory environment will be complicated and fragmented.
Countless inconsistencies and inefficiencies will arise and what businesses banks can do, who they employ to do it and how they fund themselves while doing so will change.
Perhaps the time has come to accept that greater regulation is desirable and look for the opportunities in the new financial world rather than fearing the changes that it will bring.
Regulators and governments are keen to cure the problems caused by banks that end up too big to fail and bring problems created in overseas markets home for them and their taxpayers to clean up.
This is not a backward step for banking. After all, lenient regulation did not make society any wealthier, if the current global economic outlook is anything to go by.
Balkanizing regulation and markets may drive up compliance costs for banks with a presence in a multitude of them but, given the bail-outs of 2008, it is questionable what good it did the financial system to have such beasts bestriding the global marketplace in the first place.
Instead of worrying about the difficulties of doing their jobs under, say, Basel III, bankers would better use their time to look for opportunities in the new, less globalised system. After all, there have always been headache-inducing regulations in markets, which bankers presumed had been installed to inconvenience them.
HIGHER COMPETITION
So to pretend that the days before 2008 were an ambrosial age of innocence and regulatory utopia in which bankers and clients could frolic with abandon for the good of global GDP is utter nonsense.
More specialist advice will be needed to access and navigate local markets. Whether global banks invest in regional specialist bankers to do so or regional banks build on their natural advantages to attract client business remains to be seen, but either move could well revive a phenomenon that has all but disappeared — job creation in the banking sector.
More likely, big banks will have to opt out of certain markets, at least initially. That is no bad thing. A multilateral, common regulatory environment served big global players at the expense of smaller, more regional ones before.
By driving the need for increased local expertise, regulators will level the playing field and create higher competition — a most welcome development for the clients that the banks are there to serve.
Regulators and governments are right to legislate to protect their own interests. It is not their responsibility to regulate for the convenience of banks that they may well have to bail out later, and that can ultimately endanger the health of the public purse.
The onus is on banks to work harder to find new ways to do business and new business to do. In chaos lies opportunity.
Those banks that are quickest to spot those opportunities will flourish, while those dinosaurs that lobby to wind the clock back to 2007 deserve to die out.
This article was first published by Euroweek.com.
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