I was at a luncheon the other day in the City of London to listen to a talk by one of the UK’s MEPs (Member of the European Parliament).
As you recall, the European Union, also known as the “grand experiment”, is an economic and political union of 27 European member states. With a combined population of 500 million inhabitants, in 2010 the EU generated an estimated 28% of the global economy. As a trading block the EU is the largest exporter and importer of goods and services, and is the biggest trading partner to several large countries such as the United States, China and India.
And, as our London MEP pointed out, the EU is the initiator of a mountain of regulation.
One of the discussions that caught my attention came after the speaker’s remarks on the banking industry. He verbalized what everyone knows: If there is another financial meltdown, there will be no bailout money for the banks. Neither the general public nor government has the appetite to use taxpayer monies a second time to bail out the banks. It just won’t happen. So, if that is the reality, where is the plan?
Where is the plan, developed by the banks themselves, to avert another crisis? What plans have they come up with at this point to safeguard their industry and protect the public from another financial crisis? As the senior business members in the room agreed, the banks need to get their heads together and come up with a plan, because they won’t get another bailout!
So why haven’t the banks come up with their own plan? The problem with the banking industry coming up with a “save our industry” plan lies in the current culture of banking. Cooperation and collaboration for the common good is not a part of the cultural vocabulary of today’s financial services industry. Not only do they savagely compete with each other, internal competition is the norm. As one senior banker noted, “as an industry we don’t work well together.” Indeed, by their own admission most banks have a difficult time even getting departments from the same institution to collaborate, let alone work with other institutions collaboratively.
Can such an industry plan be built? Possibly, but it will take one or two courageous leaders of the major financial institutions to step outside the current mindset of profit “uber alles” and remember that first and foremost the financial services industries were created to help individuals, corporations and nations grow and prosper. Profit is a by-product of service, not the end goal.
My concern is that unless the banking industry figures out a way to curb its excesses, shift the current culture, and work together to implement safeguards, we will wind up with mega-regulation where everyone loses.
Tight Lines . . .