India's banking sector has long been considered a laggard in relation to the country's hugely successful economy, and this year's Top 1000 Banks ranking shines a new and unflattering light on the true extent of India's malaise.
To the average member of the US Congress, the world is a simple place - if China can be pushed to let the renminbi float free or at least be revalued, the US trade deficit with China will disappear and US manufacturing jobs will magically reappear.
The UK is in the honeymoon period of a new government - a novel coalition of right-of-centre Conservatives and left-of-centre Liberal Democrats. This is sure to end as the government sets about taking the tough tax and spending decisions required to bring the UK's budget numbers back into shape and avert a Greek-style crisis. The worry is that, as the coalition members try to decide which departments take the hit, they will jointly vent their fury on the financial sector as a convenient scapegoat.
When markets crash someone or something must be at fault - heads must roll, structures reformed, the rules rewritten.
There is an old saying on Wall Street: "Bulls make money. Bears make money. Pigs get slaughtered." In the eyes the Securities and Exchange Commission (SEC), a bullish Goldman Sachs conspired with a bearish hedge fund, Paulson & Co, to lead a couple of hapless clients to the slaughter.
Who wants to converge with western Europe? Greek sovereign finances are threatening eurozone cohesion, a euro-denominated credit boom in central and eastern Europe (CEE) spiralled out of control, protests on the streets have brought down several CEE governments. Transitional Europe has lost faith in transition, say doom-mongers.
Momentum is gathering for an increasingly tough stance on banks, with many governments positing levies on them, and regulators broadening the debate to include philosophical questions around the social relevance of various bank activities.
Late last month, for the first time in its history, the London Stock Exchange's (LSE) share of trading in FTSE 100-listed stocks fell below 50% in intra-day trading: cue endless column inches on the death of the traditional stock exchange and the rise and rise of the so-called multilateral trading facility (MTF). This is indeed a significant milestone, but it should not be regarded in any way as marking the beginning of the end for the incumbent bourses.
"If international markets take precedence over the democratic process, there is something wrong with the system." These might sound like the words of Greek prime minister George Papandreou, confronting the fury unleashed by global investors on Greek sovereign spreads since late 2009. However, they are actually the words of another George, one who has made his fortune betting against government policy and against European monetary union - George Soros.
A fisherman, with a Lutheran background, born two years before the Wall Street crash, Paul Volcker seems an entirely appropriate choice to reform the US banking system. The patience of a fisherman, the reforming zeal of a Lutheran and a childhood spent facing the consequences of the Great Depression seem the ideal qualifications.
Is it possible to further injure a country's international credibility while trying to help shore up its finances? It is in Argentina. President Cristina Fernández de Kirchner demanded $6.5bn of the central bank's funds to repay government debt, and issued a presidential decree to give the demand legal relevance and circumnavigate congressional approval.
Last month, China took another step towards global economic superpower status, announcing that in 2009 the value of its exports exceeded $1200bn, overtaking Germany and making it the world's biggest exporter. China also looks set to outgun Japan as the world's second-largest economy by the end of the year and, with gross domestic product forecast to grow by more than 10% a year for most of the decade, it will not be too long before China usurps the US as the mightiest global economy.
Amid all the politicking about compensation and the scapegoating of banks for the global economic downturn, the general public has probably failed to notice that a lot of taxpayer money used in the bail-outs is flowing back fast - and that it is being repaid with interest.
The same game of moral hazard versus systemic risk that was being played out with banks is now being played out with sovereigns. Senior European figures have engaged in 'constructive ambiguity' towards Greece - telling it to put its house in order but staying oblique as to whether the EU will step in to save the country from default. A similar state of confusion existed between Abu Dhabi and Dubai until the United Arab Emirates capital extended a $10bn bail-out to the troubled emirate.
The biggest danger facing banks today is that they will be asked to hold too much capital. Regulators have seized upon a lack of capital as a fundamental cause of the crisis and are now busy seeking its greater application in every part of the business. The worry is that they will become over-zealous and hobble future growth.
When the European commissioner for competition, Neelie Kroes, announced at the end of October that ING must be broken up and reduce its balance sheet by 45% to comply with state aid rules, not just the banking industry was shocked by the harsh conditions.
As the world's financial community gathered in Istanbul for the IMF/World Bank annual meetings, there was a look of relief on bankers' faces. Bumper profits are back at some of the leading investment banks, while government loans and capital injections are being repaid. Decrying regulatory overreaction or populist attacks on bonuses, many seemed satisfied with a return to 'business as usual'.
Has Islamic finance reached a significant size and maturity to genuinely compete with conventional banking services? Can Islamic banking be more than a niche industry?
The Basel Committee on Banking Supervision has spoken. In its 'Comprehensive response to the global banking crisis' published on September 7, the committee declared that "the predominant form of Tier 1 capital must be common shares and retained earnings". The message is clear. Hybrid securities are not regarded as high-quality Tier 1 capital.
Chinese banking is at a crossroads. The rise of Chinese banks over the past decade has been nothing short of phenomenal, but there are still challenges ahead as the government urges them to lend more to keep the economy moving.
Ask a passer-by in any European city what he or she thinks about the Payment Services Directive and you will be met with a blank stare. Try to explain it and you will be met with a yawn.
A profit rebound at leading investment banks in the first quarter. Record hard currency debt issuance in the first and second quarters. Credit default swap spreads on major financials tightening by anything up to 300 basis points. In the first half of 2009, it was almost possible to forget that the credit crisis of 2008 had ever happened. Almost.
By the time the crisis is over banks will face a whole new set of regulations and probably regulators too. Clearly the current model failed and most bankers accept that there needs to be change. But the current nightmare scenario is of additional layers of bureaucracy, the lack of a level playing field between jurisdictions, and politically inspired directives that fail to address the most important issues.
The financial crisis introduced the idea of banks that are not only too big to fail but, in some ways, too big to save. When their assets become multiples of the gross domestic product of even an advanced country, and when guaranteeing their liabilities threatens to bankrupt the nation, there is a legitimate political debate about the size of banks.
The inauguration last month of a new Central Bank of Nigeria governor who promises to open up the banking sector and encourage foreign investment bodes well.
Its longevity is as unique as its global appeal and from its very first issue to this, its 1000th, The Banker has remained true to the vision set out by its founder, Brendan Bracken. The international outlook and forward thinking that has made The Banker such a success over the past 83 years is a course that will be steadfastly continued. Writer Stephen Timewell
London's role as the world's leading financial centre faces a barrage of hostilities from all quarters and needs huge support if it is to survive intact.
EU membership has brought undoubted benefits for the central and eastern European (CEE) countries that joined in 2004 and 2007. Foreign direct investment and job creation surged, helping to make convergence a reality. Western European banks have bought subsidiaries in many CEE states, allowing households to monetise home ownership rapidly.
One of the most damaging aspects of the crisis for the badly hit globalised banks has been the sale of their prime overseas assets in a desperate bid to shore-up capital. It promises to reshape world banking, with most of the gains coming in the emerging markets.
When the financial crisis began, India, China and the tiger economies were still running well. Current account surpluses, huge reserves, high savings rates and relatively clean bank balance sheets boded well for Asian resilience.
When Nigeria last faced an economic downturn of this magnitude, in the early 1980s, the inaction of a fledgling civilian government led directly to a military coup, followed by decades of political instability and economic malaise. Today, the price of oil, Nigeria's biggest export earner, has nosedived, the stock market has crashed and foreign investors are pulling out – but this is not the 1980s.
Latin Americans know all about financial crises – they have suffered some of the worst. But this time they have had the satisfaction of seeing a financial crisis originate in the mature countries and not in their region.
Bankers must prepare to buy more sovereign bonds and grapple with the difficulty of making any kind of return out of them. In some ways, the new business of international banks is going to resemble the old business of emerging market banks.
An opposition politician has described the UK government’s bail-out plan as consisting of “stunts and wheezes”. This may be unfair but it highlights a tendency among governments battling with defective banks to be over-complex and to play politics rather than focus on simple financial solutions.
The solvency of banks was understandably the focus of 2008. But as 2009 begins, markets are beginning to think the unthinkable: what about governments?
While the credit crunch was ‘made in America’, it may be China and the ‘made in China’ economic model that becomes the biggest casualty of the crisis.
Institutional investors are up in arms again; this time at Deutsche Bank’s decision not to call its 2009-14 subordinated bond. “We are disappointed and concerned at this action taken by Deutsche Bank, a leading global capital markets operator with no capital or liquidity issues,” fulminates the Association of British Insurers.
As world leaders meet to discuss the future of capitalism, banks need to find new ways of financing trade.
It is a moot point whether the leaders of the Global 20 (G20) industrialised nations achieved anything tangible, beyond increasing their carbon footprint, in Washington last month.
Not for the first time in recent months, the beleaguered hedge fund community was under the spotlight in November, as industry luminary George Soros issued a dire warning that the sector “will be decimated” by a 50% to 75% decline in assets under management.
Even before the dust has settled after the biggest banking blow up in 80 years, the first signs of what a post-crisis world will look like are starting to emerge. The winners in banking will be those that recognise the changes first and work out to how to position themselves correctly.
If history ended on November 9, 1989, when the Berlin Wall fell, it returned with a vengeance on the week starting September 14, 2008, when Lehman Brothers filed for bankruptcy, Merrill Lynch rushed into the arms of Bank of America and one of the world’s largest insurers, AIG, was effectively nationalised by the US government.
The European Union is in the midst of a massive regulatory upheaval in an attempt to realise its goal of a single market in financial services.
Understanding UK bank strategies can be difficult. The past year has seen not only Royal Bank of Scotland’s joint acquisition of the Netherlands’ giant ABN AMRO but also the disastrous run on Northern Rock, record 2007 profits at HSBC Holdings and, last month, RBS’s first half-year loss in 40 years, following $11.4bn in writedowns.
Shareholders who oust hitherto successful CEOs for problems not of their making are being shortsighted.
The current crisis is not the worst the world has ever faced as Western economies have learnt much from past mistakes.
