The Financial Pandemic Has Finally Ended!

By Shlomo  Maital

    Banks  Bank Revenue/GDP (%)

  It took five financial crises,  endless bailouts using our tax money, media wars against lobbyists, and Occupy Wall St. protests – but at long last, the global banking and financial services industry has been gotten under control. The ‘pandemic’ of inflated bloated revenues, at our expense, seems to have ended permanently.  Thank heavens.

   An article in the latest McKinsey Quarterly  [Miklos Dietz, Philipp Harle and Tamas Nagy, “A new trend line for global banking”, McKinsey Quarterly May 2013] says that “after climbing for 30 years, the share of economic activity attributable to bank revenues fell in the wake of the global financial crisis. Looking forward, revenues oculd flatline at about 5 per cent of GDP through 2020 (the same growth rate as nominal GDP).”  (See Figure).

    Banks’ waistlines won’t grow, but they won’t shrink either – they’ll stay the same, after doubling as a proportion of GDP from 3 per cent to almost 6!  That’s good news.  It means that in order to compete  global banks will have to do what local Czech banks have been doing – innovate, give better service, listen to customers, and above all stop acting like drunken gamblers in derivative markets they don’t understand.  (See my previous blog). 

     I wonder, though, why it took us 30 years and five crises/panics to stop the pandemic.