Since the turn of this century the practice of banking has experienced such tremendous existential change as to be incomparable to the enviable industry it once was during the roaring nineties. As management consultants – working over the past fifteen years specifically within banking – we have found ourselves on the frontlines of the battle between the purest form of uninhibited capitalism, and the opposing forces calling for state intervention.
Certainly, many of the wounds suffered by banks since the crisis of 2007 have been self-inflicted. There will, however, be certain deeply negative and lasting consequences to much of the codified law that has been scribbled out of the populist revolt that followed.
To a large degree it has been forgotten that banking is the engine room of the body economic. Without it functioning as a viable privately-run industry, it will serve to magnify growing inequality as well as to magnify the dissonance between leadership and the populace. The western world has recently taken a sharp turn to the right. It has become inward- looking, prejudiced, parochial, and angry. Should the trend continue, we may soon witness banking becoming adjunct to the state, and an instrument of its political objectives.
As consultants we have had the privilege to travel and work in many diverse cultures across the world. In the run-up to the crisis we were privy to thin-capital buffers, high leverage and exceptional ROEs. The themes today are very different: anti-money laundering, reining in tax evasion, stress testing, and risk process audits. In the breadth of our experience we have observed a steady grinding down of the ability for banks to innovate and accelerate the economy.
We intend for this Journal to document our thoughts, to point out the internal contradictions, perhaps even to provide a small voice for caution against the maelstrom of political and economic chaos that is now commonplace.
In this first ever Monocle Quarterly Journal we cover over-capitalisation of balance sheets, blunt liquidity rules, myopia in the exercise of stress- testing and in the excessive fining of banks, as well as some of the political motives that have driven these phenomena. We hope the research, as well as the polemical tone, at the very least sparks debate. Our gratitude is extended to all those we have met thus far on the journey we have travelled. No doubt there is much more to witness and to learn, and perhaps even to change.
Chief Executive Officer