Redistribution of up to 20% of global financial market in favor of local banks is expected for 12-24 months

Baku, Fineko/ Morgan Stanley and Oliver Wyman forecast the redistribution of the global financial market forecasts for the next 12-24 months.

Their report says that under the new conditions, the financial institutions will have to identify their strengths and weaknesses, betting on the first and get rid of the latter.

"They have already begun and will continue to cut staff, sell assets or even whole lines of business. As a result of exit from some segments of the market by weak players and appearance of more advanced competitors in their place, 15-20% of the world will be subjected to redistribution,” the Morgan Stanley/Oliver Wyman report says.

The basic idea of the report is forecast of the world financial market deglobalization, as large regional banks will have the advantage against the background of protectionism of the regulators. In addition, in response to the tightening of regulations and conditions of business, finance companies around the world will reduce in the coming years the amount of assets on their balance sheet by almost $2 trillion.

Because of rising costs on attracting funding and stricter regulation in 2011, investment banks have cut off their balance sheets by 7% of total assets.

According to the Morgan Stanley/Oliver Wyman forecast, in the next two years, investment banks around the world will reduce the risk-weighted assets by 10%, or $1 trillion. In addition, the banks targeting corporate clients will also lower their assets: this figure can reduce by 15%, or $900 billion.

"It’s really a defining moment for the investment and corporate banks. The market does not fully represent the extent to which banks will streamline their operational portfolios and shifts in the market that can happen in the next 12-24 months," the report says.

The process of de-globalization of financial services market has already started: after the crisis, regulators started paying more attention to the operations of "daughters" of foreign banks in their controlled markets. They require from them to increase capital and liquidity, fearing that in the event of a crisis their parent companies will focus primarily on their own well-being.

For example, in a short time the U.S. Federal Reserve can set such claims to the "daughters" of foreign banks. Realizing that in such circumstances they can not compete with larger local players, many banks have decided to abandon the non-core overseas operations in favor of the home market.

"Local banks operating in major markets will benefit from this process, as foreigners will find it even harder to compete with them. But everything will depend on the particular bank. If you’re a big player who cannot use traditional business models under the new conditions, you will lose. However, your place will be occupied by other players who on velvet," says James Davis, a partner of Oliver Wyman partner.



27.03.2012 09:50


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