Jan 22 The financial system is safer than it was
five years ago as banks have more capacity to withstand shocks,
but more needs to be done to reduce risk, particularly in
A poll of bankers, lawmakers, regulators and others
attending the World Economic Forum in Davos, Switzerland showed
61.7 percent believed the financial system was safer than five
years ago, while 38.3 percent said it had not improved.
"Markets are safer, and quite markedly so," Douglas Flint,
chairman of Europe's biggest bank HSBC, said during a
debate that preceded the poll of those attending the session.
"It would be a shocking indictment of the industry,
regulators and public policymakers if six years after a dramatic
crisis efforts hadn't been successful to make the system safer,"
Others disagreed, however.
"I don't believe the financial system and markets are safer
and I don't believe they are safe," Paul Singer, founder and CEO
of New York-based hedge fund Elliott Management, said.
"The leverage in the system, especially in derivatives, has
not been meaningfully reduced, and the opacity of derivatives
and other complicated securities has not been changed at all."
Complex derivatives have been blamed for playing a big part
in the financial crisis and regulators have tried to improve
transparency in these products.
Singer said countries that were the last line of support in
2008 now had less capacity to help the industry, while many
financial firms still did not understand their risks.
But Flint and Antony Jenkins, chief executive of Barclays
, said increased capital and liquidity gave banks far
greater capacity to withstand shocks, recovery and bail-in plans
should limit damage to a bank in trouble, regulatory and
supervisory resources had swelled and the structure of pay had
improved to discourage risk-taking.
Management were spending a majority of their time on these
issues, and HSBC's board spent between two-thirds and
three-quarters of its time on regulation, oversight and dealing
with legacy issues, Flint said.
"It's very difficult to argue that the financial system is
not safer than it was in 2008, but the question is how much
safer is it," Barclays' Jenkins said.
"We still have a significant amount of work to conclude the
implementation of all of the regulatory changes, and this will
not happen until close to the end of this decade," he said.