Survey finds high risk of another global recession and renewed banking crisis

The risk of another global recession and a renewed banking crisis is high, according to the Centre for the Study of Financial Innovation's annual ‘Banking Banana Skins’ survey, produced in association with PwC, which also puts macro-economic risk at the top of the list of 30 possible risks to banks. According to the poll, the anxiety about the outlook for banks is at its highest level since the survey was started 13 years ago. Anxiety is mainly caused by the eurozone crisis, which brings with it the threat of sovereign default by several countries. “The shock of a euro collapse would hit banks not just in Europe, but in all major regions of the world. Bankers in countries as wide apart as the US, Canada, China, Argentina and Australia put the euro crisis at the top of their list of concerns,” reads the survey. The first consequence of a crash would be large credit losses, followed by a funding crisis with banks cut off from access to liquidity and fresh capital. “Banks are clearly worried about the dangers posed by continued turmoil in the eurozone, the threat of a further credit squeeze and uncertainty created by continued regulatory changes”, said Vasile Iuga (in picture), Country Managing Partner, PwC Romania. Dan Iancu, Partner, Financial Services Industry Group Leader, PwC Romania, added: “Against this backdrop, many banks will struggle to generate adequate returns across their business. Banks will be forced to reshape their businesses and further job losses across the sector seem inevitable as banks seek to drive down costs”. Moreover, for the first time, the ‘Banana Skins’ survey shows the risk outlook to be better in the emerging economies than in the industrialized world, but the survey also showed growing concern about the prospects for China as its economy slows and its banks face growing pressures. The poll is based on responses from more than 700 bankers, banking regulators and close observers of the banking industry in 58 countries. Irina Popescu, irina.popescu@romania-insider.com