BANKERS STRAIN AGAINST SHACKLES / THE FINANCIAL TIMES

Bankers strain against shackles

Patrick Jenkins

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©James Ferguson

Volatile — if one word could sum up the year in finance, that would be it. In the markets there has been a mix of new highs and sudden plunges. In banking, there has been a succession of abrupt changes in management. And the pendulum of financial policy, which had swung for years towards tougher regulation for banks, has begun slowly to move the other way.

Yet the most hotly anticipated trigger of volatility — the start of interest rate rises in the US — has yet to materialise. After months of predictions of hikes by the Federal Reserve, rates remain at record lows, though Fed chair Janet Yellen has begun dropping hints that the mid-December meeting will yield the first rise in nine years.

All the same, after another eventful year, one thing is clear — the world is still a long way from normalising after the crash of 2008. This special report draws on some of the FT’s best financial coverage of 2015 to reflect the top themes of the year.

As economic growth became more of a concern — particularly in Europe — safety requirements were moderated and the zeal for punishments over financial conduct began to abate.

The switch was clearest in the UK, where punitive taxes were eased, new laws on ringfencing and directors’ duties were softened and Martin Wheatley, the pugnacious head of the Financial Conduct Authority was sacked. In Europe, financial services commissioner Lord Hill talked of the need to consider whether there has been an overload of EU regulation.

 

Part of the regulatory focus shifted to the insurance and asset management industries, both of which have benefited in some areas from the crackdown on banks since the 2008 crisis. But here, too, there has been pragmatism. Only nine insurers — and none of the world’s big reinsurers — were designated as “systemically important” and in need of special capital buffers. Asset managers have escaped the designation altogether, prompting some critics to point to the risks to financial stability posed by ever-growing giants such as BlackRock and Vanguard.

The risks are mounting in three ways, these critics say. Asset managers are becoming bigger.

Banks are playing less of a buffering marketmaking role. And markets are ripe for dramatic corrections. Equity markets in the US and UK hit record highs this year. So did the volume of mergers and acquisitions.

There have been some signals of extreme market jitters. The uncoupling of the Swiss franc from the euro saw its value spike by 40 per cent in January. In April, there was a “flash crash” in normally implacable German Bunds.

For all the softening of regulatory rhetoric in recent months, little benefit has yet to feed through to the banks. European groups have fared worse, losing ground to US rivals and changing tack with a mass leadership switches. Barclays, Deutsche Bank, Standard Chartered and Credit Suisse all put new men in charge this year.

The rapid rise of financial technology companies, challengers to the old banks, has been an upbeat theme of the year, though even the “fintech” darlings have lost some of their gloss of late.