Related links

• PDF version

The financial institutions landscape has changed forever says the fourth global crisis survey by Norton Rose

11 May 2009

• 69% think the financial institutions landscape has changed forever
• 68% think better regulation could have prevented the global crisis
• 61% believe global regulation of financial institutions is not practical
• 52% say tighter regulation will impede a recovery
• 68% believe risk management should be given increased resources but only 47% thought financial services would actually make the necessary investment
• 83% agree more focus on remuneration is required as part of risk management
• 75% say state intervention in financial institutions has been effective
• 84% feel not enough is being done to rid the banking system of toxic assets
• 66% expect financial institutions to significantly reduce products and services

The Fourth in our series of surveys tracking market sentiment in relation to the Global Financial Crisis examined a theme of “Financial institutions in the future”. Norton Rose LLP surveyed 197 respondents comprising financial institutions and other mainstream corporate entities between 6 -15 April 2009. The online survey was designed to canvass the views of financial services professionals on the impact of the latest phase of the global financial crisis, following the G20 in April 09, on the future for financial institutions.

James Bateson, head of Financial Institutions at Norton Rose LLP commented:

“We are entering a new phase in relation to the Global Financial Crisis. A more thoughtful approach is emerging as politicians and regulators seek to rebuild the financial system for the future. Whilst it is clear from our results that there is a commonly held view that regulation could have prevented the global financial crisis (66%) there is an interesting paradox in that effective global regulation is viewed as not practical (61%) and a majority of respondents believe tighter regulation could impede a recovery (52%). The issue that must be must be addressed is whether it was a failure of the regulation itself or the failure to effectively enforce. This is key to understanding how regulation should work in the future and ensuring it does not impede the recovery.”

69% think the financial institutions landscape has changed forever
Nearly 70% of respondents agree that the financial institutions landscape has changed for forever but surprisingly 30% disagreed. In view of the sweeping changes to regulation being considered as well as the damage wrought to individual institutions during the crisis it is difficult for many to imagine that things will ever be the same again.

68% think better regulation could have prevented the global crisis
Many attribute the severity of the global financial crisis to a failure in regulation. There is a general sentiment that tougher regulation is required to prevent the problems of the past from reoccurring and that a greater degree of international cooperation is necessary. But there is concern that a one-size-fits all approach fails to acknowledge the different geographical and market segmental impact of the crisis.

61% believe global regulation of financial institutions is not practical
It is highly unlikely that, as scholars of the financial world have pointed out, a stable financial system, an integrated financial system and national financial autonomy are all compatible.

52% said tighter regulation will impede a recovery
Although the US and UK governments in particular are asking the banks to lend more, the regulators are demanding that they manage their risks better - the corollary of which is “deleveraging” and less lending.

68% believe risk management should be given increased resources but only 47% thought financial services would actually make the necessary investment
Respondents broadly agree that more authority and resources (68%) should be given to risk management functions in financial institutions. Unfortunately only a minority (47%) believe they will be given the resources.

83% agree more focus on remuneration is required as part of risk management
Respondents overwhelmingly agree that financial institutions should be more focused on their remuneration structures as part of their risk management strategies. Previous Norton Rose surveys have revealed that many finance professionals acknowledge the need for changes, but these latest responses suggest opinion has moved even further. In February 2008, nearly 42% said there should be a move towards long term incentives while 40% came out against such a move.

75% of respondents say that state intervention in financial institutions and markets has been effective
It can only be surmised the 25% of respondents who answered “no” to the question are concerned about the quality and nature of state intervention rather than about whether intervention was necessary at all.

84% feel not enough is being done to rid the banking system of toxic assets
Respondents in overwhelming numbers said that not enough is being dome to rid the banking system of toxic assets.

66% expect financial institutions to reduce significantly the range of products and services they offer
There is a general consensus that financial institutions will need to change in order to be in the best shape to compete as the global economy recovers. Most respondents think it is likely (51.8%) or highly likely (14.2%) that financial institutions will cut back the range of products they offer.

Report available on request. More information can be found at here.

For further information please contact:

Sean Twomey

Nicole Sharp

Editors note

Norton Rose LLP is a constituent part of Norton Rose Group, a leading international legal practice offering a full business law service from offices across Europe, the Middle East and Asia.

Knowing how our clients’ businesses work and understanding what drives their industries is fundamental to us. Our lawyers share industry knowledge and sector expertise across borders, enabling us to support our clients anywhere in the world. We are strong in corporate finance; financial institutions; energy and infrastructure; transport; and technology.

The Group comprises Norton Rose LLP and its affiliates. We have over 1300 lawyers operating from offices in Abu Dhabi, Amsterdam, Athens, Bahrain, Bangkok, Beijing, Brussels, Dubai, Frankfurt, Hong Kong, Jakarta*, London, Milan, Moscow, Munich, Paris, Piraeus, Prague, Riyadh*, Rome, Shanghai, Singapore, Tokyo and Warsaw.

With effect from 1 January 2010, Deacons Australia, a leading Australian law firm with offices in Sydney, Melbourne, Brisbane, Perth and Canberra and teams in Singapore, Jakarta and Ho Chi Minh City, will join Norton Rose Group. The enlarged Group will have over 1800 lawyers in 30 offices worldwide, 700 of whom will be based in Asia Pacific, and will form one of the best-resourced legal practices in the Asia Pacific region.

* associate office