UK respondents foresee that the global recovery will most likely be long and shallow (56%) according to a survey by international legal practice, Norton Rose Group. Respondents were nearly evenly split with 54% expecting that the proposals to restructure UK banks by separating retail banking and investment banking would not make any significant difference to systemic risk in the UK financial sector. The prevailing view is the state of economic growth in the UK is either fragile at 66% or very fragile at 24%, with the remaining 10% describing it as steady.
The report, Global Financial Recovery: A Matter of Perspective, sixth in a series, released today by Norton Rose Group details the views of 156 UK respondents from a range of financial institutions, including banking, insurance and funds. The survey was fielded between 13 July and 17 September 2010 and answered by 314 respondents globally.
Other UK findings from the report include
[according to the 156 UK respondents only]:
- 69% disagree or strongly disagree that restructuring the FSA will harm the competitive position of the UK as a financial centre.
- 54% agree or strongly agree that proposals to restructure the FSA will improve regulatory supervision.
- UK respondents were nearly evenly split in agreement or disagreement (49%/51%) in their views that the restructure of the FSA will be of little relevance given the increasing role of the EU in regulatory supervision.
- 77% think bank levies will be treated by financial institutions as insurance premiums rather than encouraging better risk management in the UK.87% of UK respondents ranked Asia (including China) highest as offering the best prospects for business in the current financial landscape, in line with the global score of 87%, however, the UK has the most positive outlook on North America at 10%, whereas in all other markets it ranked below 3%.
- Only 56% of UK respondents agree that the appetite for global cooperation on regulatory reform has diminished and in consequence the risk of another global financial crisis has not been effectively addressed, compared to the global average of 65%.
In so far as perceived risks to financial institutions in the UK and possible solutions, James Bateson, head of financial institutions at Norton Rose LLP commented:
“It is clear from our research that UK financial services still perceive risk in their market. However, what may surprise some people is the level of flexibility in so far as agreeing how to address that risk. While more than three quarters of UK financial respondents recognised a risk in the market that will not be better managed through bank levies, there was an almost even divide as to whether separating retail and investment banking would encourage better management of risk, and also whether the restructuring of the FSA would be of relevance. This suggests there’s an acknowledged risk, but an openness toward the solutions.”
Jeremy Edwards, Group Head of Banking, Norton Rose Group is surprised by the ambivalence toward splitting up retail and investment banking:
“There appears to be a split in opinion as to whether separation of retail and investment banking activities would make any significant difference to systemic risk, but most people I speak to agree that any such split would increase the cost and reduce the range of products available in the UK retail banking market. Is the consumer ready for that?”
Peter Snowdon, corporate finance partner and Charles Evans, dispute resolution partner in the financial services team at Norton Rose LLP commented on reactions to changes of the FSA.
Peter Snowdon said:
“These survey findings might well surprise some people, as the general perception in the market appears to be that the majority of opinion was not positive towards the proposed FSA restructuring. These findings indicate a much more even split of opinion and that there is more agreement out there for reform than has been apparent up till now.”
“Another interesting finding from the survey indicates the shifting perceptions of where regulatory power is thought to rest. Half of the respondents believe the EU has an increasing dominant role in the supervision of UK regulatory matters. If this division of opinion reflects the reality of the situation then, for example, it will have a significant impact on the amount of lobbying that will need to be done at a European level.”
Charles Evans noted:
“Given the uncertainty over the ultimate shape of the new regulatory regime for the UK and the considerable time it will take to implement the reforms, it is perhaps surprising - but encouraging - to see that the clear majority of the respondents did not think that the UK’s competitive position would be harmed.”
Copies of the Global financial recovery: a matter of perspective report can be downloaded from www.nortonrose.com/FIsurvey.
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