Mr. Alan Chan, Chairman of the former Petrolships Investment opened the session with an overview of parties involved within the inner realm of the money markets. We were reminded to analyze not only the current economic catastrophe that has affected the world, but also to acknowledge the fact that this crisis had a point of origin and had its share of catalysts.
With globalization pulling all local markets into one conglomerate financial market place, the world is now feeling the detrimental effects and impact of the crisis that hit a few major U.S. and European investment banks, insurance firms and mortgage banks resultant of the sub prime mortgage crisis.
The issue when dissected is highly convoluted, with many layers of complacency. However, simplified it points to banks that have gowned accustomed to flippancy. Instruments and products packaged to clients that were attached to unrealistic expectations of gain and obtuse explanation of risks involved by agents of the bank have only helped to exacerbate the problem.
Loans given out to clients that did not meet the proper requirements were approved and somehow repackaged and taken up by other banks and insurance firms. As such, layers of fine print and transactional matter that the hectic finance industry is unable to pay attention to has left an untidy trail.
We had thought that monetary regulatory institutions were meant to keep the check and balances between banks and also to safeguard the investments of the nation, keeping the national treasury healthy. Nonetheless these institutions did not adhere to their function and the lack of enforcement lead to the absence of accountability.
With all these factors it is difficult to identify an establishment that is safeguarding the savings of the conscientious who probably used to think that banks would be infallible. Herein lies the concept of stake. It begs the question of whether taking high risks in hope of high returns with the savings of the majority is responsible. The lessons we have learnt today point to the fact that not only the risk takers bear the fall, but every layperson who is engaged within today’s globalised world is affected by the down turn of events. And if so, who is in the position to take that risk and would he/she or the enterprise be responsible for the decision?
Mr. Manu Bhaskaran, the Head and Partner no less, of the Economic Research
Centennial Asia Advisors Pte Ltd comments that global sentiment and investors responses were reactive rather than proactive. He substantiates that trade has increasingly dipped to a point of nil demand despite bi-lateral efforts to resuscitate demand. Therefore it is no surprise that there is a sharp decline in the export of commodities as there is virtually no found cargo to be exported. The downward spiral of figures and decline in growth is to the point of negative. These symptoms of deflation are akin to that of the great depression in 1929.
He attributes the crisis to firstly, the structural loopholes in the global financial economy. The very financial infrastructure and mechanisms meant to protect the masses are not properly in place. Corporate governance and payment systems with it’s checks are acknowledged only in theory but in truth are not comprehensively implemented and have gaping loopholes. Thus with the credit crunch in the U.S and Europe permeating money markets in Asia and the region more trade, investor-confidence have drastically dipped are amplified during these times.
Harsh as it is, the importance in the role of governance of infrastructures in the management of systemic risk is a lesson to be taken on board. Mr. Bhaskaran goes on to explain that policy is vital as it garners massive responses and effort of the masses. However, policy has to be relevant and resilient to the many circumstances and fluctuations of the globalization and its waves of change. Regulation has to be married with training and execution. With these fundamentals in place, only then can buyer confidence be retrieved and earned and investors will once again put their money where stability and prosperity go hand in hand.
Ms. Jen Wang
Communications, Events and Membership Executive, SIIA