Unilateral Diktats on Banks

In most OECD countries, technological change, competition, financial innovation and regulation are the main drivers of change in banking firms. The response to these drivers have been mainly through balance sheet consolidation resulting in many cases in mergers and acquisition or through internationalisation, manifest inherently as globalisation. In developing countries, liberalisation of banking laws and capital markets created opportunities for foreign banks to enter local markets. The opening up of the less developed economies further resulted in foreign direct investments (FDIs) boosting local markets, creating synergy and economic growth. FDIs are an important source of rent for countries that are connected to the global economy. They represent a valuable source of new money and economic activity. An increase in a country's FDI invariably means that there is increased investor confidence in that economy. Banks as drivers of economic growth are a key part of new money in the global economy. In addition banks are instruments of expression of local economic policies of the governments of countries that they are licensed to trade in. FDIs were handicapped by the global financial crisis that began in 2007 - 2009 and spilled over into the European Sovereign Debt Crisis of 2010 to 2015, adversely impacting countries like Ireland, Portugal, Spain, Italy, Greece, Cyprus and Iceland. The development of new regulatory tools to combat the crisis was in part an acknowledgement that the provisions of Basel III were inadequate. Banks responded to increased regulatory scrutiny by devising new business models and strategies. Now new threats to the global financial system are beginning to emerge. London as the world's leading financial centre warehouses about £15 trillion of derivative contracts and trades about USD 2 trillion in FX daily. No one knows how the global economy will fare following a hard Brexit with such a high percentage of global financial assets based in London. A more sinister threat is the security pitfalls of blockchain technology and the men in the shadows that promote its use. The popularity of distributed ledger products like Bitcoin (BTC) in alternative financial circles has been described as a bubble if not an outright scam by many authorities including the Sage of Omaha: Warren Buffet; the Governor of the Bank of England: Mark Carney and the former Chair of the Federal Reserve: Janet Yellen. This book will in its key excursions, examine the inclusion of BTC in an optimum investment portfolio and whether the inclusion will result in an aggravated downside risk. My overall purpose is to highlight some of the issues facing banks towards the end of the second decade of the 21st century and by a series of diktats challenge bankers to take a hard look at the problem. Given the hyper-liberal market environment ex ante, could the financial crisis really have been foreseen?