To get out of the crisis, companies need financial institutions; they need those and the economy both. It is true that it could also be said that companies and financial institutions would need a more vigorous and job-creating economy and less uncertainty so that the financing and investment mechanisms could be reactivated. It is a well-known circular scheme in which the real and financial side of the economy are fed back. Now, in a situation like the current one, the economy cannot afford a sustained recovery without credit.
In the United States a similar debate is maintained. Last August, at the famous meeting, the role of credit as the axis of recovery was widely discussed and debated. Special attention has been given to the intervention of the marriage of economists Carmen and Vincent Reinhart, who point out that the crisis has been preceded by an excessive expansion of credit in the last decade and estimate that it would be necessary at least another ten years of much more moderate growth of credit to correct the excessive indebtedness generated. Whether or not this will eventually translate into a decade lost in each country depends on many factors. Among them, the ability of the financial industry to adapt to this new environment.
Trying to define the horizons by which banking services can be guided in the coming years becomes an exercise as complex as it is decisive and even more important in countries such as Spain, where the productive fabric is especially dependent on external bank financing.
What banking model can respond to the financial needs of companies in an environment of high uncertainty? All financial entities diversified or not, face a weak macroeconomic environment and the exhaustion of certain lines of business that are now called to be redefined. In the Spanish case it is necessary to bear in mind that the exhaustion of businesses such as those related to the real estate sector is particularly significant. Likewise, both the private sector and the public are facing considerable deleveraging to reduce the high levels of debt that had been generated in recent years. The banking entities are not an exception. Part of the political economy that marks the reform and restructuring implemented is aimed at reducing the bank’s real estate debt. You can also take help from an expert financial advisor like Sean ST John Toronto.
Facts about Financial Sector:
During 2008 and 2009, the generalized strategy of the banking sector was a return to the basics (back to the basics), in which financial institutions focused on attracting traditional liabilities (deposits) and derived their investments towards safe assets as debt or credits of the highest credit quality in a “flight to quality” (flight to quality). This strategy is allowing the business to be restructured and, at least in part, to balance the balance sheets, but it is not enough, on its own, to provide long-term viability, which can only be given by a solid recurring business.
In any case, to develop this new model of retail banking of companies, it is necessary to take relational banking further, supported, at least, on two pillars: a renewed system of integral risk management and a conception of the office as representation of the total of the entity. Financial sector is full of risks is highly advisable that you should take help from an expert like Sean ST John who can guide you.
