The
end of traditional banks privileges
The environment of traditional banks activity has been shattered
for at least four reasons:
1- The financial liberalisation of the economy funding
in favour of negotiable stocks markets.
Financial liberalisation deprives traditional banks of a part
of their goodwill. In several countries, the part of the economy
funding going through negotiable stock markets has increased.
Major firms and the State have been mainly responsible for this
funding reorganization. Banks have lost a part of their activity
volume that was previously generated by their major firms customers
(credits of poor margin but little risky).
For those last ones, banking credits and emissions of negotiable
debt are now strictly substitutable, over the course of respective
conditions of loans on these two segments of the market. Deposit
banks have also been competing with« investment banks
» and stock houses, traditional actors of negotiable stock
markets.
2-
The increasing weights of private actors now essentially obey
a profit logic.
Banks more worried about profitability considerations. The end
of the 1980s is marked by the beginning of the wave of privatisations
of several banks (or savings institutions) in Western Europe.
In the United States, and then in other major industrialised
countries, banks results are more and more analysed by their
shareholders, institutional investors (pension funds, insurance
companies).
The Couples risk/ yield those were characteristic to the majority
of banks, including public banks, are out of place. The pursuing
of a yield rate on high equity is becoming a priority. The model
of « dividend bank » which predominates in the Anglo-Saxon
world tends to impose itself at the expense of the one of the
continental Europe « full service bank ».
3- The increasing international opening of national
financial systems.
Banking systems are more and more open and extroverted. The
abolition of exchange controls and last restrictions (the 1980s
in major industrialised countries) to international flows of
funds. The bonds associates to the fact of being a member of
WTO and/ or of a local economic space (European Union) now restrain
countries to open their banking system and finance foreign actors.
Several countries become worried to build a true banking and
financial industry with an international vocation within the
framework of their developing strategy (Singapore, Luxembourg).
Major industrialised countries also worry more and more about
the competitiveness of their banks and other financial actors
on the international scene. This sometimes leads them to competitive
deregulations of their banking system.
4- The emergence of a supervising regulation with international
vocation related to this opening.
It is what tends to equalize competition conditions. International
or domestic financial and banking crises increase from the 1980s
(the 1982 Mexican crisis, American savings institutions crisis
in 1986, Scandinavian crisis of 1992-1993, Japanese financial
and banking crisis of the 1990s, Russian financial crisis of
1998, 2001 crisis of Argentina…).
The second half of the 1980s is marked by the first coordination
attempts of supervising regulation of major international banks.
They are mainly caused by the Bale Committee of the international
payments bank. Its aim is to reinforce the security (problems
of systemic risk) of worldwide banking system, while equalizing
competition conditions between major banks coming from different
countries.
The most significant measure is the Ratio Cooke, instituted
in 1988. It is a ratio of equity which balances the various
banking assets according to their respective risks and two types
of equity are distinguished: « Tier One »and «
Tier Two », fixed at 8%, it has been progressively adopted
in more than a hundred countries. It will be replaced in 2006
by the Ratio Mac Donnough which balances risks in a more précised
way, and takes into account off-balance sheet elements that
now play an essential role in banking activities. It is also
necessary to take into account the generalised adoption of International
Financing Reporting Standard (IFRS) in the equalization of competition
conditions between banks of different countries.
The environment is more and more competitive and uncertain and
a catalyst of strategies sometime fluctuating. The 1990s are
marked by the beginning of a vast movement of reorganization
of the banking industry on a worldwide scale. Banks which care
about their success or about their survival have to elaborate
more and more reactive strategies because of the uncertainties
of the macroeconomic and competitive environment.
Back
to Banking system development >>
