Advertisement

'Optimism similar to last crisis'

From BBC - January 23, 2018

The newfound optimism about the state of the global economy is eerily reminiscent of the lead-up to the last financial crisis, the head of Barclays has warned.

"I do feel like that it is a little bit like 2006," Jes Staley told delegates at the World Economic Forum in Davos.

"When we were all talking about whether we had solved the riddle of economic crises."

But he said big banks were now in a better position to deal with shocks.

Mr Staley's comments were delivered at the opening of an upbeat forum in the Swiss resort, at which the IMF upgraded its global growth forecast for 2018 to 3.9%.

Additionally, a survey of more than 1,200 chief executives by PwC found that most believed the world economy would "improve" over the next 12 months.

'Not sustainable'

Speaking on a panel ominously entitled "The Next Financial Crisis", Mr Staley said that despite an encouraging recovery, "there is something out there in the capital markets".

"Equity markets are at an all time high and volatility is at an all time low - that is not a sustainable proposition," he cautioned.

He hinted that if the stress tests that Barclays was subjected to by the Bank of England were applied to other sectors of the economy, they would not be found to be in rude health, primarily because of high levels of debt.

Mr Staley also argued that the next financial shock would not be the fault of banks like Barclays and reiterated his faith in financial regulators.

"On one level, pre-2008, the regulators were there just to bear witness," he told Davos attendees.

"Today, the political body have told the regulators, I want you to regulate the system so you avoid the next financial crisis."

Core mission

Fellow banking heavyweight Michael Corbat, the chief executive of Citigroup, shared Mr Staley's view that lenders were less exposed to risk, and emphasised that they had reverted to their core mission.

"We are not an insurance company, we are not an asset manager, we are not a hedge fund," Mr Corbat said.

"We are simply a bank."

Harvard economist Ken Rogoff, while sanguine about the prospect of a downturn in the near future, warned that there would be few tools left to deal with one if it occurred.

"There really is not even a Plan A for central banks," he said, adding that although there would be probably be further fiscal stimulus and quantitative easing, "I do not think either would work as well as they did last time".

Cascade concerns

'It will happen'

Advertisement

Continue reading at BBC »