Why need foreign talent in finance?
Look at the three local banks that we have, big strong and financially sound. These banks were built, brick by brick, under conservative and traditional principles and practices of banking. They grow in a slow pace, under strict regulations and scrutiny. Their conservative and traditional practices have lagged them behind the multinational American and European banks, the Citis, Goldmans, the Morgans, the Lloyds, Barclays and the UBS. These American and European banks grew rapidly during the period of liberalisation and deregulations. But then many grew big fast and quick and went pop fast and quick as well. In banking and finance, the hare and tortoise race is still applicable in many ways. With the benefits of hindsight, the Americans and Europeans are trying to rein in the free wheeling days when high finance is nothing more than a casino and selling snake oils. Liberalisation and deregulation were what they demanded and what they got, and the whole system nearly collapsed with trillions lost across the world. The situation is best summed up by an article in the ST by Howard Davis, former Chairman of Britain’s Financial Services Authority and now director of the London School of Economics. He quoted Andy Haldane from the Bank of England, …‘Only when markets were deregulated and liberalised from the early 1970s onwards did finance once again leap ahead…. He argues that much of the apparent growth in value added has in fact been illusory, based on increased leverage, excess trading and banks writing deep out of the money options, for example, credit default swaps, a US$60 trillion (S$80 trillion) market in 2007....What all these strategies had in common…was that they involved banks assuming risk in the hunt for yield – risk that was often disguised because it was parked in the tail of the return distribution.’ The era of fool’s gold may be over and America and Europe may not see its heyday sooner. But fear not, for if America and Europe ‘over constrain the finacial sector, risk may migrate outside the regulatory frontier, where it will be harder to measure and monitor.’ And this is where Singapore can step in. The rejects from the American and European financial industry are welcomed here to do their damages. Our local banks is in need of these foreign talents to spurt growth, to grow as big as Citibank, Lehmans, Goldmans, Morgans, the Bears and Stearns and the likes. Shall we or shall we not welcome these foreign talents into our financial industry? They will bring growth and innovation and boost our productivity and bottom line practically overnight. We don’t have to wait a millenium to grow our local banks to super banks. They can be super banks with the foreign expertise and their innovative banking practices and writing off debts. Banks need to take risk, high risk, and operate like casinos if they want rapid growth and high yield. With our greed for instant growth, like our infamous instant tree formula, we have no choice but to embrace these foreign talents with open arms. PS. Below are the causes of the financial crisis listed in Wikipedia. You can actually tick those that are applicable and happening here to see the risk that we are exposed. 1 Background and causes(2007/8 financial crisis) * 1.1 Growth of the housing bubble * 1.2 Easy credit conditions * 1.3 Sub-prime lending * 1.4 Predatory lending * 1.5 Deregulation * 1.6 Increased debt burden or over-leveraging * 1.7 Financial innovation and complexity * 1.8 Incorrect pricing of risk * 1.9 Boom and collapse of the shadow banking system * 1.10 Commodities boom * 1.11 Systemic crisis * 1.12 Role of economic forecasting