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How much progress has been made since Lehman?

Friday, September 13, 2013 - 02:54

Sept. 13 - Almost five years on from the collapse of Lehman Brothers, is the system any safer? Joanna Partridge looks at how vulnerable Europe is to another Lehman-style banking crisis.

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Five years ago - the unthinkable happened - Lehman Brothers collapsed. The repercussions are still being felt and the world economy is still recovering from the global financial crisis. But are banks any safer? SOUNDBITE: Richard Hunter, Hargreaves Lansdown, saying (English): "Capital cushions and the buffers that have been imposed by various regulatory authorities should provide some degree of comfort." SOUNDBITE: Peter Schaffrik, RBC Capital Markets, saying (English): "The capital ratios have increased, the leverage ratios have gone down and particularly over here in Europe a lot of the bad assets have been written off." SOUNDBITE: Mike Gallagher, IDEAGlobal, saying (English): "There are areas of weakness and particularly some weaker banks in Europe need some surgery." PTC Post-Lehman, lenders are subject to tighter regulation and are required to hold more capital. But not everyone believes that's enough. Different regions are trying to strengthen their banks in different ways. After over three years of financial market turmoil following a series of bailouts, euro zone politicians are building their flagship banking union. On Thursday they gave the European Central Bank new powers to supervise up to 6000 banks. The goal is to create a backstop - which has the ability to wind down failed lenders and protect savers' deposits. ECB Board member Joerg Asmussen. SOUNDBITE: ECB Board Member, Joerg Asmussen, saying (English): "This in our view is the biggest integration step in Europe since the introduction of the common currency." It's one of the euro zone's most ambitious and challenging projects and is seen as a way of warding off future crises. But disagreements mean it's been a long time coming. Oliver Burrows, Senior Banks Analyst at Rabobank, isn't convinced a one size fits all approach is the answer. SOUNDBITE: Oliver Burrows, Senior Banks Analyst, Rabobank, saying (English): "What works for the French banking system might not work so well for the German banking system, or the Italian banking system, or the Spanish banking system and we have seen different speeds of paying attention to the banking system in different countries. So for example in Spain there has been an enormous amount of consolidation, 43 local savings banks have been reduced to the low teens, whereas in Germany nothing has changed, they still have thousands of banks." Switzerland is looking at other ways to strengthen its banks. Swiss politicians are renewing their efforts to split up UBS and Credit Suisse. They want to separate the riskier investment banking activities - over concerns the country's two biggest banks are still too big to fail. SOUNDBITE: Oliver Burrows, Senior Banks Analyst, Rabobank, saying (English): "They far outweigh the size of the Swiss economy and they're taking the right steps to make sure that if one of those banks gets into difficulty, Switzerland doesn't get into difficulty. And it's really about sovereigns and their link to the banking system and the Swiss are taking it very seriously." Banks are slowly returning to health, and are better prepared to weather the storms. But few doubt there won't be another financial crisis at some point in the future.

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How much progress has been made since Lehman?

Friday, September 13, 2013 - 02:54

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