Ever since the credit crunch of 2008 the financial landscape has been transformed. Governments have got more involved in legislating the controls which need to be in place for banking institutions to operate. Additionally, commercial organisations themselves have found it necessary to more closely understand the risks that are present in their businesses, and to control their appetites for profit.
New jobs for new concerns
Steve, of wenhamcarter.com, a leading financial recruitment company in London, says that “we have seen a massive rise in the number of risk management and regulatory jobs in the financial services industry. Companies are, since 2008, more conscious than ever about the possibility of fines, and controlling the amount of risk that they will accept.”
There is really no surprise that there has been such a shift in the financial landscape. Bear Stearns was sold to JP Morgan for $236 million. For a company that had been valued at $20 billion, just a few months earlier that was a massive hit for stakeholders and shareholders. With countless other casualties in 2008 and the intervening year consumers and companies alike have been worried.
The economies of the USA, and Britain, seems to be doing fairly well. There are positive signals that 2015 could be a growth year in the States. Although the climate of fear has, to a certain extent abated, the underlying tone of uncertainty remains.
Confidence will return with better controls
The credit crunch, highlighted a key aspect of the financial world. That is that confidence underpins the stability of the system, and when it is eroded and eradicated the system falls over. Over time we will see these new concerns as being less salient in the overall consciousness of the financial sector. However, it isn’t until the skill set of the risk managers, and the processes of the companies, are fully mature that we will be able to say that the risks are under control.Corporate self-governance, it seems, still has quite a long way to go.
The government still has a role
The failure of the Financial Services Authority to mitigate against the risks that were pervasive in the financial services sector prior to 2008, and in particular, 100% and 110% mortgages, led to the morphing of the financial body into the Financial Conduct Authority. Some within the sector claim that little has changed other than the name. However, it is clear that there are more highly priced people working at analysing the profile of banking businesses, understanding the relationships between financial incentives and long-term financial stability, and controlling the attitude towards profit.
The big challenge in the UK from the changing environment is that lots of people that should be able to afford to buy their own home cannot. As a nation that is built on its homeowners this is a major problem. The government’s help to buy and mortgage guarantee schemes are certainly bridging the gap that has been created by the changing financial landscape. The government seems to be encouraging more lending. However, there need to be checks and balances in place to ensure that such encouragement is in the best interests of the long-term stability of the pound and the country.
It is unlikely that we’ll ever see 110% mortgages again; nor should we really. But, when we can truly trust the financial institutions, and their risk management processes, we will see a return to a more positive lending climate. In the short-term, it seems the best news is for those with the analytical personalities that are suited to the new wave of jobs that have been created.