End of an era for credit model
Bankers heads herald back to basic approach in lending arena.Lenders will have to change the way they operate as they enter a new era of back to basics business and tighter regulation, industry chiefs have warned.
Speaking at the British Bankers' Association annual conference, Steven Green, group chairman of HSBC, said that banks which were previously over-reliant on securitisation and wholesale funding will have to rethink their business approach due to the current liquidity crisis.
"The model of profit from increased leverage has gone," he said. "This is not just the end of a bubble; it's the end of a model."
This was reiterated by Eric Daniels, chief executive of Lloyds TSB, who said that there is a clear renaissance of branch networks under way as banks move to create financial centres for customer service.
Bank of England governor Mervyn King told delegates that plans were being considered to make permanent the Bank`s special liquidity scheme, but he said this was not to be seen as an incentive by banks to take on more risk.
"If banks feel they must keep feel they must keep dancing while the music is playing and that at the end of the party the central banks will make sure everyone gets home safely, then over time the parties will become wilder and wilders," he said.
"That might not matter were the consequences limited to the party-goers. But they are not. When the party ends, some innocent bystander may lose their homes altogether."
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