– By Samuel Harrison, current student MIF 2011 –

The first CFA Titans of Finance of the academic year 2011/2012 took place last Thursday, October 20th, and was hosted by an ex-IE Business School MBA student. After graduating from IE in 1993, Miguel Lainz is now a Managing Director of Deutsche Bank and Co-head of Investment Banking in Spain. The session was designed to be highly interactive and the class was heavily involved throughout, starting when we briefly explored the past and present state of the banking sector. We then formulated some theories and predictions for the possible shapes the financial sector may assume in the future.  

After some discussion, we arrived at the conclusion that no single individual, organization or sector was to blame for the today’s financial malaise, and we went on to explore the so-called financial ‘vicious circles’, which have been created as a result of the great recession. Currently, three circles are in existence: a sovereign crisis, a banking crisis and an ensuing economic crisis. The three conditions are closely intertwined, self-perpetuating and have caused a catastrophic loss of confidence in the sector. Possible solutions? There are many, and we polled the class for their preferred method. Those voting for printing money and inflating our way out of the crisis outweighed those who voted for austerity by around 2.5 to 1, whilst several found the decision all too difficult and chose to abstain. We concluded that, in the long-term, cutting costs and living within our means is the only definitive answer to the current web of economic problems. 

Looking beyond the macro issues and deeper into the banking industry, we see higher bank capitalization, re-regulation, consolidation and the increased ‘utilitisation’ of banks as the likely upshot from the current crisis. These measures and much more, will hopefully lead to overall safer banks, which is a pre-requisite if we are to restore much-needed confidence in the beleaguered sector. Whether these factors alone will be enough, we cannot be certain… but it is definitely a step in the right direction. All eyes will now return to the upcoming meetings amongst European politicians and central bankers, as investors hope they start to take the first steps, of what will be a very long journey, towards economic recovery.

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