Global Financial Institutions on the Path to Recovery

By added on 18/12/2012

Financial institutions are on the long path to recovery from the global economic crisis, according to J Christopher Flowers, an international specialist in financial services who spoke at London Business School's latest thought leadership forum in Dubai, AME reports.

Mr Flowers shared his thoughts and insights on the global outlook for the financial services industry during an evening hosted by the Coller Institute of Private Equity and London Business School. The forum was moderated by Ann Iveson, a Senior Advisor to the Coller Institute of Private Equity, and attended by alumni and key decision makers in the region's financial industry.
"One thing I think, which is not necessarily a common opinion, is that eventually, and let's say by 2020 as an example, financial institutions and returns on capital and profitability for financial institutions will return to normal," said Mr Flowers, who was speaking at the Dubai International Financial Centre.
"Not everybody thinks that and there are those in the financial institutions industry who think that we are facing permanently low returns on capital. I don't see it that way. The reason I don't think that is going to happen is that these industries are absolutely essential to the functioning of the economy. It is necessary that more capital flows into these industries so they can provide the financing the economy needs, and that will require higher ROEs."
Mr Flowers and Ms Iveson discussed what they think is in store for banks and insurance companies and what key stakeholders and regulators have learned from the financial crisis. The discussion focussed on Europe and concerns posed by the uncertainty of the Euro but also encompassed the overall financial services landscape and the role of private equity.
On the Euro, Mr. Flowers said: "I've been through many ups and downs in the economy, but to have this situation of whether the currency will persist or not is a very unusual issue. If a country leaves the Euro, most banks in that country and some in others will go broke. And that will be calamitous. We think it's highly likely the Euro will hold together. If it doesn't, it's really going to be a disaster."
The London-based Mr Flowers, who was formerly partner in charge of the Financial Institutions Group at Goldman Sachs, said the fundamental economic and political challenges will be matched by profound changes in financial services, and its regulation in particular.
"More than any time in a long time financial institutions have to make decisions about what businesses they want to be in," he said.
"I think now more than ever there is a shift where there is premium on excellent management. Of course that is always important but at a time that is as tricky as this, there will be broader dispersion of winners and losers. A lot of that is the cards they start out with. Not every institution has the right cards but it's also a lot about making the right choices."
The event was attended by representatives from Barclays, Bank of New York, Citigroup, Commercial Bank of Dubai, First Gulf Bank, HSBC, ING Investments, JP Morgan Chase, Morgan Stanley, Standard Chartered and Price Waterhouse Coopers.
Daniela Sfeir, Regional Head of Corporate Relations, Career Services at London Business School's Dubai Centre, said: "Our thought leadership forums are proving to be hugely valuable for our students, partners, recruiters and of course business leaders in the region who are gaining important insights into the marketplace and the dramatic changes we are seeing in business locally and also internationally."
Majid Hassan, Managing Director of Prestans Capital, who graduated with an Executive MBA from London Business School in 2010, helped to attract Mr. Flowers to Dubai.
"With the financial services sector going through fundamental changes since 2008 due to significant economic and political challenges, it is very important to fully understand what impact these changes such as increased regulation, austerity measures in Europe and the prospect of further Quantitative Easing in the USA will have on a global scale as well as on the Middle East region," he said.
"Who better to shed light on the global outlook for financial services than Chris Flowers who has been at the forefront of both advising and investing in this sector."