Today I am joined by Peter Cahill. Peter is the practice leader for both M&A and Operational Performance Improvement. Peter’s experience is broad and wide ranging which always lends a valuable slant to his perspective.
Q:Â Peter, do you see a real need for banking reform?
I have been pondering this very question for some time. If we look at what led up to the current economic crisis, you will find that banks were taking much more risk than they did 10 or 15 years prior. I believe with the partial repeal of the Glass-Steagell Act in 1999, banks began looking for more ways to generate revenue in areas not previously allowed. On the surface, this allowed the banks to offer products in a more competitive environment. We as consumers benefited by having expanded products and services available to us, combined with relaxed credit standards. So yes, I believe there is significant opportunity to reform current banking regulations, to reduce the amount of risk the banks are allowed to take, or forcing them to at least be more risk averse, thus strengthening the banks financial position.
Q. Do you think we will see some form of legislation this year?
I’m confident there will be some new legislation this year. The mix of public sentiment against the banks, the position of the electorate, and court of public opinion weighing hard on the banks, all combine for the perfect recipe for banking reform.
Q. Do you believe the reform will be broad and sweeping, or narrowed and focused?
I think it will be narrow in the short-term and possibly a bit broader in the next few years. Congress is under a lot of pressure to get some reform in place. With the November elections fast approaching, the incumbents need something to boast about. If this becomes a prominent issue in the election, you’ll see even more reform implemented with the next Congress.
Peter, thank you for joining me, and sharing your initial thoughts on a topic that is dominating conversation throughout the banking industry. I guess as I think of reform it somehow seems evolutionary in the industry. Manage change so that change doesn’t manage you or your organization.
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