As Sibos 2011 draws to a close, the pervading mood throughout the week was one of uncertainty - and for good reason.
The Dow closed at 10,733.83 points, but was at one stage 522 points lower, or 4.7%. The S&P 500 and Nasdaq indexes closed just over 3% down.
In the days leading up to this, ratings agency Moody’s downgraded three top US banks - Citigroup, Bank of America and Wells Fargo - citing uncertainty of sovereign support. According to the Financial Times1(FT), global investors moved a record US$50bn in money market funds (MMFs) this week, taking money out of bonds and shares.
This uncertainty was palpable on the conference floor. Many delegates, although voicing satisfaction with the level of business they were conducting, remarked that the mood was not as buoyant as in Amsterdam last year - before the crisis in the eurozone and the US sovereign debt issues.
Many conference sessions lauded the rise of the emerging markets, but it is the developed world that drives confidence in the global markets.
Where is the Growth in 2012 and Beyond?This question was posed at the ‘Big Issue’ debate entitled ‘Back to Business’ on Wednesday. Speaking on the panel were:
- John Coverdale, group general manager, head of global transaction banking (GTB), HSBC.
- Tim Keaney, vice chairman and chief executive officer (CEO) asset servicing, BNY Mellon.
- MD Mallya, chairman, Indian Banks' Association (IBA) and chairman and managing director, Bank of Baroda.
- Paul Simpson, head of global transaction services (GTS), Bank of America Merrill Lynch (BofA Merrill) - watch the short video interview with Simpson here.
The panel came back to the debate around the unintended consequences of regulation. Coverdale argued that although regulation is necessary, a level playing field is needed, i.e. different jurisdictions cannot implement their own flavour of the agreed global regulation. The issue of regulatory arbitrage was also discused, with both Keaney and Simpson acknowleding that with different interpretations of the same regulation arbitrage would happen, as all entities try to maximise their shareholder value.
The emerging markets remain the areas of focus in terms of growth. Moving beyond the BRICs (Brazil, Russia, India and China) to the ‘KEVITS’ (Korea, Egypt, Vietnam, Indonesia, Turkey and South Africa), all panellists could see great growth opportunities in these countries.
Simpson pointed out that outsourcing demand is coming from the public sector, both within developed and developing nations. In the developed world, governments are having to outsource what is not in their value chain because their budgets don’t go as far as they used to; while in developing nations, rapid growth requires a fast scaling up of infrastructure and products that many countries cannot manage themselves. Mallya also agreed that the public sector needs huge investments and now the private sector is taking this on in public private partnership arrangements.
But Keaney argued that there is the risk that the BRIC nations are overheating - with the exception of China - which could cause another dampening affect on global growth.
Uncertainty Rules the DayThe uncertainty in the markets is fuelling fear and, in turn, conservative behaviour. Despite being in the risk business, Coverdale argued, many banks are holding excess liquidity because of the uncertainty.
He came to straight to the point that this blog started with, stating that the industry had lost the confidence of the people as a result of the eurozone's potential disintegration and the US dollar liquidity issues. “We need to fix this crisis,” he said. “The politicians have got to stop playing around and sort it out.”
First published on www.gtnews.com