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Global finance to experience reform in 2013 – EIU survey


Global finance will continue to haul the heavy weight of reforms in 2013 and beyond says the Economist Intelligent Unit (EIU) survey report.

According to the report titled “Industries in 2013,” 405 executives were surveyed in November 2012 on their expectations for businesses conditions in 2013.

The survey sample was global, with 46 per cent of respondents based in Europe, 25 per cent in Asia, 10 per cent from the Middle East and Africa and 5 per cent from Latin America, also, 37 per cent of the respondents are relatively senior holders of C-suite positions while 7 per cent are board members who work in organizations of varying sizes, with 53 per cent earning annual revenue of US$500 million or more.

The report revealed that the Basel III standards, launched in 2013 is to force global banks to hold more base capital, and better forms of capital such as equity and retained earnings. “This should make lenders more resilient the next time a crisis hits.

“In the short term, however, raising the extra capital will hurt, few investors want to buy bank shares these days, so most lenders will hold on to any profits (instead of sharing them with investors) or sell off assets such as loans, properties and entire business units and this pain will remain sharpest in Europe, and the US to a lesser extent.

“Banks in emerging markets are little affected since most already hold capital of the types and quantities required by Basel III.

“Other reforms are less sweeping but will also bite as most developed countries want to move the lucrative business of over-the-counter derivatives onto less-profitable clearing platforms that offer greater transparency,” the reported stated, noting that a lot of the European nations plan to impose financial-transactions taxes and tighten rules about the balance sheets of insurance companies while the US wants to bar deposit-taking banks from investing in private equity and hedge funds.

Accordingly, the EIU is of the view that finance hurt by the two-track course of the world economy will remain largely unchanged in 2013, saying that the challenge of finance is overwhelmingly concentrated in developed countries.

“According to our forecasts, rich countries of the Organisation for Economic Co-operation and Development (OECD) will grow by a paltry 1.4 per cent, while non-OECD countries will expand by 5.8 per cent, these markets will hold 77 per cent of global bank assets in 2013, falling only to 76 per cent by 2016. These same developed countries take in 85 per cent of insurance premiums and hold over 90 per cent of investible assets.

Meanwhile, Chief Economist, EIU, Mr. Robin Bew said that in the penultimate year, 900 business leaders were globally surveyed to gauge their outlook for six key sectors.

Bew said, “Their sentiments, which we tracked throughout 2012, are now starting to look more positive. Our latest complimentary report, Industries in 2013, summarises these findings and also contains our view on the definitive trends across these six industries:  Automotive, Consumer goods and retail, Energy, Financial services, Healthcare and Telecommunications.


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