Beyond the ongoing 'short-term' subprime crisis, the 'mega trends' that will shape banking and its growth in the long term will be globalization, the growth of capital markets and global asset growth and its impact on how it's managed, said Deutsche Bank's top corporate and investment banker.
The German bank's Michael Cohrs says he has been wrestling with the â€˜seismic shocks' to the world's credit markets but has also been appreciating new opportunities where cash transactions will take precedence in the short term.
Regardless of what happens â€¦ what I do know is that the current market dislocation is an opportunity for everyone in this room, he told over a thousand banking and finance specialists Thursday at the closing plenary of the Sibos banking industry conference in Boston.
Interest in basic cash management will continue as investors re-price all forms of risk, he said.
People will hoard cash and for a long time â€¦ cash will be king, he said, expecting that basic cash management through Transaction Banking will grow during the crisis as it has in recent months until the market stabilizes.
Looking ahead he noted the unprecedented acceleration of globalization will continue to drive banking, especially in financial services.
He noted that geographical boundaries are disappearing, citing recent European political developments to integrate the continent's finances beyond the Euro, by creating a single market and regulations for investment services and unified European payment zone.
He also noted the growth in economic activity and jobs from emerging markets such as China, India and others as well as demand for natural resources in other regions.
We're talking about $3.4 trillion in reserves in these countries, still managed by the state in many cases, he said.
Globalization will also continue to expand growth in capital markets as investors demand more access to markets. Emerging markets still only have financial stock as a small portion of their economies. Investors will be looking for quality and simplicity in financial products.
Also with less emphasis on traditional loan finance, banks will increasingly work as intermediaries providing services to clients in transaction banking by helping companies raise money with issuer services and by providing investor services for those investing in capital markets.
Global Asset Growth
Mature markets will see the need for private retirement funding. Emerging markets and their new wealth will open up opportunities in private investment and management of state-owned funds.
In addition he said the growth of hedge funds, private equity firms and real estate firms - who have comparatively little infrastructure - will provide opportunities for banks to fill in the gaps.