The
Consolidation of Banking Systems
1) Increasing competition.
2) Strong uncertainties of the environment.
3) Banking strategies.
1)
Increasing competition.
The search of an increased allocative efficiency and a bigger
productive efficiency of banking systems has inspired the deregulation
and the introduction of several financial innovations in the
1980s.
The forces of competition have then been liberated within the
banking systems which had almost forgotten them since the 1930.
The combining of innovations (notable technologic ones) and
of the deregulation has often led to the birth of banking overcapacities
(increased offer of traditional actors and newcomers). This
has sharpened the competition, which has sometimes become destructive
and has rapidly led to the erosion of interest margin on credits…
First compensated for by the rapid rise of granted credits to
borrowers often very risky:
•
Strong information asymmetries toward new borrowers.
• Opposing selection within the credit portfolio: big
firms and best borrowers raise their funds on stock markets.
• Absence of culture of the risks management within banks
after several years of credit restrictions.
The rise of uncertain claims has often been accompanied with
a diversification of activities, to preserve satisfying profits.
Certain years, the banking sector of several countries is globally
in deficit (sign of overcapacity). Those heavy losses encourage
the reorganization of the banking sector. This reorganization
causes specific problems which differ from the consolidation
of other branches of the industry, particularly in case of big
banks considered as « TOO BIG TO FAIL ».
Among the solutions to face their losses:
• Association with a more powerful partner (Japanese banks
at the end of the 1990s).
• Recapitalization by the State within the framework of
a temporary. nationalization (Swedish banking system after the
1992 crisis).
• Undoing structure which separates good and bad bank
(Crédit Lyonnais with the Consortium of Realization after
1992).
Overcapacities, hard to measure, are therefore hard to eliminate.
For several years they have constituted a lasting element of
the environment to the definition and the implementation of
banking strategies, notably in the retail bank or the universal
bank.
2) Strong uncertainties of the environment.
The macroeconomic environment in industrialised countries will
present in the upcoming years a certain number of characteristics
relatively stable:
• Weight of public debts
• Poor inflation
• Necessity of increasing inter-generational transfers
in relation to the aging of the population.
However some uncertainties surround:
• The rates of economic growths and their volatility according
to major economic areas.
• The evolutions of worldwide payment imbalances (including
the American deficit) and their impact on exchange rates and
their volatility.
• The maintability of the high growth rates of emerging
countries (including China, India, and Russia) and their consequences
on:
o The cost of raw materials
o The distribution of international funds flows and its consequences
on the stability of the worldwide financial system.
The regulatory context continue to be torn between two contradictory
tendances :
On one hand:
• The pursuing of the international harmonization of various
measures of cautious control (ratio Mac Donnough) and accounting
rules.
• The increasing opening of financial systems under the
pressure of the WTO and because of the pursuing of the building
of various local spaces.
• The persistence of protectionist temptations and individualist
behaviours from the part of the countries which want to:
o Protect their banking system from foreign penetration.
o Or /and to increase its international competitiveness.
The tax system and various norms (protection of consumers, for
example) always play in thus respect a crucial role. In addition
technologic progress will continue to have a major impact to
shape the structure of the banking system.
Back
to Banking system development >>
|
