World central bankers report: bank debt will slow recovery

The problems in the banking world are not over quite yet. In reality that doesn’t really mean the banks themselves are in trouble – they remain untouchable – but the taxpayers who saved their sorry asses from ruin are in trouble. The bankers have made sure they win regardless of performance and aren’t very interested in the “we’re all in this together” spirit that others had when they rescued them. Other than total failure like Lehman, what does it take for them to understand? Even at Lehman, the top few people walked away with millions in bonus money even after going bust. It’s unfortunate but there’s no reason why any of the banks should be helped when they run into trouble next time.

In their latest quarterly financial services survey, the CBI and PricewaterhouseCoopers (PwC) say many parts of the sector expect business volumes to rise in the next quarter after 21 months of falls. But despite these early signs of optimism, Ian McCafferty, the CBI’s chief economic adviser, cautioned that banking remains “under pressure”.

“Conditions remain challenging, particularly for the banks. Although demand looks like it is beginning to recover, it is doing so from a very low base. We can still expect lower profitability, significant job losses and cuts to investment in the coming months. The rising levels of bad debt are a further worry for the industry,” he said.

His note of caution chimed with the warning from the BIS. As one of the few bodies consistently sounding the alarm about the build-up of risky financial assets and under-capitalised banks in the run-up to the credit crisis, the BIS’s assessment will carry weight with governments. It says: “The lack of progress threatens to prolong the crisis and delay the recovery because a dysfunctional financial system reduces the ability of monetary and fiscal actions to stimulate the economy.”

An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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