Nine years on, but the big banks are still not out of the woods

A notification from Facebook recently reminded me that I landed in London nearly nine years ago to study journalism.

Almost simultaneously the world went through the pain of the global financial crisis.

In September 2008, as I made my way to a meeting in Canary Wharf, I saw hoards of people walking out of the then Lehman Brothers office with boxes in their hands.

I remember being very intrigued as to why so many people were moving at once. Little did I know that this was the start of a new era – one that was going to haunt the global economy for years to come.

This was when the financial services industry lost the trust and credibility with customers that it had built.

A number of investors, including small-time pension holders and retail investors, were faced with perplexing questions when they lost their savings in these crisis-stricken investment banks, which were later bailed out by the government using taxpayers’ money.

Nine years later, the global economy has come a long way from where it was.

But a major factor in the developments since then can be attributed to the artificial environment created by the world’s central banks, which pumped billions into their economies to try to stabilise inflation, limit unemployment and incentivise growth.

While these efforts might be slowly bringing the global economy out of the woods, financial services are still being badly hit.

Banks are currently operating in a much more regulated environment than they did prior to the crisis. Ultra-loose monetary policy from central banks is still not great news for lenders. Banks make profits through margins between their lending and deposit rates, but the current environment is making it tough for lenders to operate.

Over the past few years, we have seen banks go through innumerable rounds of restructuring, which have involved closing down parts of their businesses and laying off parts of their workforce in order to streamline their operations.

Banks are facing increased competition in attracting talent through a plethora of new and upcoming sectors.

Add to that political and economic uncertainties, such as the UK’s vote to exit the European Union, and President Donald Trump’s as yet unfulfilled campaign pledges on tax cuts and regulation.

Last week also marked the tenth anniversary of the bailout of British bank Northern Rock, which saw the savings of reportedly over 100,000 investors, including pensioners, wiped out.

Ten years on, shareholders and investors are still nursing their wounds from losing all their savings.

While the financial services industry may still be reeling from the effects of the crisis, it is the investors who have had to pay a hefty price.

The broken relationship and lack of trust between banks and their customer base across the world will take a long time to rebuild.

And just when you start to think banks are stepping up their game, investors were hit with yet another scandal late last year. Did someone mention Wells Fargo?

Let's block ads! (Why?)