Despite the upbeat partying and business cultivation by bankers in Davos, Switzerland, at least one attendee ? 38 year-old Barrie Wilkinson, a Cambridge grad and UK-based risk management analyst ? foresees a financial catastrophe that governments will not be able to handle. See InvestmentNews article, “Next banking crisis will hit in 2015 ? and be much worse: Analyst.”
“If there is another banking crisis, the Western governments are just in no shape to stabilize the system, they’ve expended their entire arsenal on the last round of fiscal injections,” Wilkinson was quoted as saying. “The fundamentals haven’t been addressed at all,” he argued, adding: “The things that caused the previous crisis — loose monetary policy and trade imbalances — they’re actually bigger now than they were then.”
Wilkinson’s report, titled “The Financial Crisis of 2015: An Avoidable History,” describes how banks, unwilling to accept the lower returns on equity that result from higher capital requirements, would fuel a new bubble in commodities or emerging markets. In addition, the regulatory focus on banks may drive risk-taking into unregulated funds that would also threaten the system.
“Banks need to be less leveraged,” said Wilkinson. “The true test for me of whether they’ve deleveraged is if the industrywide ROEs come down. If they don’t, I’m very suspicious that there are hidden risks in the system.”
World Bank President Robert Zoellick also sees a number of dangers ahead, according to a CNBC.com article by Patrick Allen entitled “Danger Points Threaten Sustainable Recovery: Zoellick.”
“There are concerns coming out of dealing with sovereign debt issues in Europe, also some of the municipalities in states dealing with the United States and then there is always the challenges we are dealing with now, with food prices,” he was quoted as saying, adding: “I hope that we will have a sustainable recovery, but I think we need to recognize that there are danger points that we are going to need to face this year just as we faced last year and its going to require the key economies in the international system to try to work together and manage the differences, because if they spin out of control that increases the anxiety in the markets and that will hurt everybody.”
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing institutional and individual investors in investment-related litigation and arbitration all over the country. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 40 occasions.