Get rich quick trumps market reform: analysts

The Group of 20 countries, meeting next week, were supposed to have stamped out the financial market abuses at the heart of the global crisis but little seems to have changed since their last summit, analysts say.

Hopes for reform after the market chicanery that brought down a series of 'too-big-to-fail' banks and sparked the worst slump since the 1930s have faded with the return of the 'get rich quick' mentality, according to analysts.

"The bad old habits have come back much faster than was expected," said Denis Marcadet of Vendome Associes in Paris.

The Group of 20 countries, meeting next week, were supposed to have stamped out the financial market abuses at the heart of the global crisis but little seems to have changed since their last summit, analysts say

"Make a lot of money and quickly," is the refrain again, he said.

The G20 rich and developing major economies have made reform of the financial markets a key objective but analysts say that good intentions are failing to keep up with reality.

"Nothing has changed, if it is only that the banks now give the appearance of being much stricter so as not to get splashed all over the front pages," said Eric Singer of Singer and Hamilton, a head-hunting agency specialising in financial services appointments.

Derivatives -- complex and often highly speculative investment instruments blamed for much of the turmoil and damage -- continue to be widely used and traded with little meaningful regulatory oversight.

"Sure, there are fewer (derivatives) now than before the global crisis but they are still as much in use. Some seven trillion euros (9.9 trillion dollars) are out there," said Olivier Huneau, a dealer at www.nouveautrader.com

Uncontrolled speculative trade in derivatives sank US investment banking giant Lehman Brothers in late 2008, setting off a chain reaction that brought the global financial system, and then the economy, to its knees.

Never again, said the politicians and regulators, but two years on what has changed? The bonus culture, said to have encouraged too much risk-taking, seems alive and well, analysts said.

This year, the banks, brokers and finance houses will pay bonuses worth some 144 billion dollars to staff, according to a Wall Street Journal study.

"We have undoubtedly made a lot of progress, on paper, but much of it is just window dressing," said Pierre Ciret, economist at Edmond de Rothschild Asset Management.

Ciret said the banks, many kept afloat by massive government support, need to be closely scrutinised because, if they are more careful now, "that will all change once their balance sheets are sorted out."

Singer said the authorities do not understand that speculative bubbles can now build very quickly, meaning that regulators have to anticipate more.

At their 2009 summit in Pittsburg in the United States, the G20 called for increased oversight of derivatives markets, trader salaries and bonuses along with reform of the ratings agencies -- to make them better monitors of credit risk -- and curbs on proprietary trading, where brokers trade for themselves not clients.

But other reform measures appear more distant.

New rules proposed in September by the Basel Committee of international regulators to strengthen the capacity of banks to confront future crises do not take effect until 2013.

Another initiative to improve the quality of bank equity holdings will not become operational until January 1 2015.

Nevertheless, bank lobby groups have been active on the sidelines, arguing that too severe a tightening of regulations could hobble lending and pose a threat to the global recovery.

source AFP

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