Repartition of the Global Banking System is inevitable

The financial crisis continues to storm in the global markets. This time the main victim of crisis is a banking system developed and developing countries. And experts notice, that the global banking system will undergo huge changes by 2012.

According to experts' opinion, banks of majority of countries will look absolutely different in two or three years: some banks will disappear, others remain afloat.

It should be noted that the American banks were the first ones to feel on itself the consequences of the crisis. Now the banking system of the USA radically differs from how it looked several years ago: investment banks have ceased to exist and have been transformed into banking holding companies. Now is the turn of the European banks, market participants note. "Banks should concentrate on their key subdivision. Times, when banks gained money from air, became a thing of the past", - Arthuro De Frias, the analyst of Dresdner Kleinwort, marks.

Experts also think that the majority of banks should reduce the volume of loan proceeds and moderate their appetites. "Banks will become smaller and will actively increase volumes of deposits", - Simon Morgan, the analyst of MF Global, says, adding that even now the majority of banks dismiss employees, cut down expenses, limit crediting and actively involve private investors.

And it is quite possible that banks will not limit themselves by these measures. For example, Royal Bank of Scotland (RBS) will have to reconsider its entire policy. British authorities bought 58% of the bank at the end of last week, thereby having given the bank management a possibility to reconsider the entire strategy of conduct of business. Now the head of RBS plans to accentuate banking services for private persons, brave management and services in financing, i.e., as a matter of fact, the bank will return on 6-7 years backwards, market participants add.

Market participants also say that there will be a tendency to consolidation in banking sphere in the nearest future, as small banks will try to merge with their larger competitors.

According to Ralf Silva, the representative of Tower Group, about one third of European banks can disappear in the next three years. "I think 10 or 15 large European banks will soon supervise about 80 percent of all market. Banks will also be less dependent on extra capital", - the expert adds.

Anyway, the majority of banks still feel critical shortage of means. According to approximate estimations, capital deficiency of only the British banks makes about 740 billion dollars this year. Experts also note that the year 2009 will be very uneasy for banks. Particularly, the profit will be reduced sharply and the quantity of credits nonpayment will grow. Banks, which are compelled to involve additional capital, will have especially hard times.

Source: BanksDaily.com
Date: 05.12.2008 [209]