“The world’s largest banks need to shrink or be broken up in order to regain investors’ confidence after four years of scandals, high-profile trading losses and financial crises, according to a Bloomberg poll.
Almost 60 percent of respondents said they were not confident or “just somewhat confident” that banks are taking prudent risks and conforming to the law, and getting smaller was seen as the top fix in the Bloomberg Global Poll, with 29 percent choosing that remedy. Changing the compensation structure was the No. 2 way to improve trust, with 23 percent.
After injecting $600 billion to rescue failing banks during the worst financial crisis since the Great Depression, governments around the world have tried in the last four years to strengthen banking regulations to prevent a similar outcome. Those efforts have been stymied by conflicting laws and increasing complexity, making the changes harder to implement and reducing their effectiveness.
Solutions suggested so far are “a grab bag of minimalist Band-Aids to patch up the self-inflicted wounds” of the financial system, said Lew Coffey, a poll participant and a fixed-income analyst at Windsor Capital Management LLC in Phoenix. “What’s required to re-establish investor confidence is a series of basic measures to simplify the business, isolate different kinds of risks into different boxes and increase transparency to outsiders.”