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IMF Survey: Crisis Triggered Historic Financial Sector Changes—Banker
July 14, 2010
- Crisis accelerated global shift in economic, financial power to Asia
- Financial centers, growing size of banks reflect rise of emerging markets
- Warnings against overregulation of financial markets
The recent financial crisis has severely damaged the standing of the Western world and accelerated the shift eastward in economic and geopolitical power, according to top banker Josef Ackermann.
Deutsche Bank’s Ackermann: post-crisis financial system to be more regulated, less international, less profitable, but hopefully more stable (IMF photo)
ASIA 21 CONFERENCE
Delivering a keynote address at a major Asian conference organized by the IMF and the Korean government in the Korean city of Daejeon, the Chairman of Deutsche Bank told an audience of top government officials, central bankers, and executives from the world of finance that events following the crisis reflected the continued rise in Asian influence and financial prowess.
"The financial crisis also reinforced the relative economic decline of the West. Not only has the recession in the United States and wide parts of Europe been deeper and the recovery less vigorous than in many emerging markets—in particular in Asia; the crisis has also caused the further expansion in the fiscal burdens which the West has to bear," he said.
Emerging markets’ greater role
Ackermann said the growing importance of Asia was reflected in seismic shifts within the financial sector, with growing numbers of financial centers located in emerging markets.
"Even before the crisis, places like Sao Paulo, Singapore, Shanghai, and Seoul had started to catch up to incumbents. The financial crisis helped them to post some gains in market share," Ackermann stated, pointing out that some of the world’s largest banks—based on market capitalization—were now those domiciled in emerging markets such as China.
"Today, four of the world’s 10 biggest banks by market value are Chinese—in 2004, none was," he said, describing the changes as "truly stunning."
The financial crisis that originated in the U.S. subprime mortgage market in 2007 later turned into a full-blown economic crisis that engulfed the world. It prompted calls for closer supervision of the financial system and resulted in stricter rules on products and activities, higher capital requirements, and more regulation of markets.
Ackermann predicted that the result would be a global financial system that is "more regulated, less international, less profitable but also, hopefully, more stable and still open and flexible enough to allow banks to serve their clients’ needs."
Regulating regulation
However, the financier was concerned that some changes could result in an uneven playing field between economies or overregulation of the financial markets. "I am advocating that care must be taken to find the right balance between establishing greater stability, on the one hand, and maintaining the ability of the financial system to support growth and innovation on the other," he warned.
Ackermann attributed Asia’s resilience to the reforms after the region’s own financial crisis at the turn of the century that had resulted in greater fiscal discipline, financial sector regulation, and strengthened supervision. Ackermann said the financial crisis marked a turning point in the history of the global economy. "The repercussions of the crisis are still being felt, and a new landscape is emerging in which Asia stands even taller than ever before," he said.