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Leaner Western banks face slow growth


Themes: Finance

Dr Simon Taylor predicts that Western banks face a leaner, less exciting future and only have themselves to blame

After two decades of excessive development, Western banks are going through a shrinkage process and will emerge as less exciting and facing slow growth, forecasts University Lecturer in Finance Dr Simon Taylor.

In an interview for Cambridge Judge Business School’s website, Dr Taylor feels the banks themselves should take responsibility for the way they are currently regarded and are going through a process of shrinkage after 20 years of excessive growth.

He said that in 1960, the assets of the top 10 US banks accounted for about six per cent of the total GDP. By 2010 that figure had undergone a tenfold increase as the banks over-expanded.

“In the near term, for the next few years, they are having to shrink to get back to some normal level of size relative to the economy. Beyond that I think they face really quite slow growth.

“If you think of a rich mature economy like the US or the UK, people’s financial services are pretty well taken care of. There is not really much fundamental growth in either retail or wholesale services. The banks are essentially a mature industry and they just have to live with that.

“There’s nothing wrong with that but it does mean that even after a size adjustment has taken place we should expect the banks to be a much less exciting and a slow growing part of the economy.”

A former investment banker, Dr Taylor will sketch his view of the future for the banks in a Business Briefing at the Harvard Club of New York City on Wednesday 28 November.