The
1980s revolution… A financial universe liberalized
The competitive
and regulatory environment of banks is shattered form the 1080s.
This phenomenon, which started in the United States in the 1970s,
has then reached the other industrialized countries, although
it was quiet late for Germany and Japan. It has finally reached
emerging countries, at a more or less rapid rate in the 1990s.
From that
time banks have been facing unprecedented challenges and they
have to:
•
Improve their efficiency.
• Develop more and more reactive real strategies.
• Re-evaluate their decision-making process.
• Adapte their organization structures (production –
distribution – subcontracting – governance issues).
• Change the status of public and mutualist banks.
1. Causes of a financial revolution
2.
The end of traditional banks privileges
1-
Causes of a financial revolution
The financial
revolution which has started since the end of the 1970s will
deeply shattered banks activity conditions and banking activity
key lines. We can connect it to four important categories of
causes:
1.1 The changes of macro-economic environment.
The 1970s
mark the start of a period of time of unprecedented macro-economic
imbalance:
• Public deficits and the balance of regular payments
are often gigantic (4 to 5 % of GDP, even more)
• Strong inflation rates needing monetary policies over
strict disinflations.
• Increasing volatility of interest and exchange rates.
Some of
those contingent imbalances will last beyond the 1980s in several
big industrialized countries (examples: budgetary deficits in
the United States, Germany and France).
From
the 1990s various structural evolutions are added to it:
• Weight of the public debt accumulated in some countries.
• High long-term unemployment in other.
• Very weak inflation and threats in some countries.
• Ageing of the population and threats on the balance
of retirement incomes and heath systems funding in almost every
country.
To some
extend, important issues of intergenerational redistribution
are taking into account, which involve a massive and increasing
resort to assets and financial intermediaries.
1.2 Technological evolutions
Finance
is a huge « consumer » of information and on that
account is very dependant on the evolutions of information technology
(Information and telecommunications). Financial institutions
are among the most important customers of computing developers
and telecommunications operators.
Information
plays a crucial role in:
• The rationalisation of tasks and costs reduction (treatment
of cheques and other means of payment, conservation of stocks,
negotiation on exchange markets)
• Development and distribution of new products and financial
services (credit cards, online banks).
• Help to decision-making (arbitrage strategies on by-products
markets)
Telecommunications (often connected to computing) are at the
heart of the payment systems revolution:
• Increasing role of the regulation systems of important
sums in relation to the explosion of market activities.
• Interconnection of share prices and negotiation platforms
of currencies, stocks and by-products.
• Global transmission of data bases essential to financial
activities.
Despite
the continuous decline of equipment prices, investments in computing
and telecommunications represent an increasing and major part
of banks expenses and other financial intermediaries. Banks
and other financial intermediaries are becoming major customers
of computing developers and telecommunications operators. This
raises new issues for banking strategies and management, because
of the increasing irreversibility of investment choices, and
of the rapid obsolescence of the equipments and the high cost
of accelerated depreciations.
1.3 Financial innovations.
It
is necessary to make a traditional distinction between product
innovations and process innovations. Process innovations are
widely related to the integration of new technologies (dematerialization
of stocks, cheque image, and smart card). The innovations of
products have been extremely numerous during the past 25 years:
• Short-term stocks in the countries that did not have
any (commercial papers, deposit certificates, negotiable medium
term bills).
• More and more sophisticated bonds (open depreciations,
convertible into assets…)
• By-products (forward contacts, negotiable options, exchange
contracts, derived credits) bound to manage the risks associated
to any funding operation.
• Securitization of credits and structured products.
• Products of collective savings management (life insurance,
hedge funds).
1.4 Relaxing of regulatory executive
(financial deregulation or liberalization)
For
almost half a century, the banking systems of industrialized
countries have worked in the regulatory executive inherited
from the 1930s. This executive has become more and more restrictive
and inadequate from the beginning of the 1970s. The deregulation
process is then going to spread to the five main following points:
• The trivialization of the statutes of certain financial
intermediaries and the spreading of their scope of efficiencies
(deposit banks and savings institution in the Unites States,
Great Britain and in France).
• Removal of the remuneration limits of deposits and the
restriction on various interest rates.
• Depreciation or removal of boundaries between banking
activities and insurance, banking activities and capital markets.
• Opening to foreign banks (often in relation to the accession
of these countries into WTO.
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