Exclusive Online Only ContentSifma’s Ryan Says Regulators Performing Well in Crisis
September 17, 2008
Timothy Ryan, president and CEO of the Securities Industry & Financial Markets Association (Sifma), said today at Swift’s annual Sibos conference that global regulators “are taking appropriate action” to deal with the current financial crisis. “They need to be smart,” he noted, “and so far they have been.”
“We are dealing with the first financial dislocation in a totally globalized environment,” said Ryan, who has been with Sifma since April. “The biggest macro issue is, how are governments going to respond to this issue--will they work effectively, will they be coordinated, do we have the right people making those decisions?”
Ryan, who participated in a panel discussion in Vienna on what keeps CEOs awake at night, is the former vice chairman of investment banking for financial institutions and governments at JP Morgan Chase & Co. Prior to joining JP Morgan in 1993, Ryan was director of the U.S. Treasury Department’s office of thrift supervision, where he was a principal manager of the savings and loan cleanup.
Ryan said he takes issue with the hyperbole over the problems on Wall Street. “No one really knows in the middle of the firestorm what the result will be. In banking, I think what we have been seeing is a serious challenge to any entity which is wholesale funded. People who have access to liquidity, principally through deposits as in a traditional bank, are advantaged. People who had to rely on other banks for liquidity through repurchase agreements and securitization for liquidity are challenged. Investment banking is traditionally wholesale funded and we are seeing a change.”
Panelists Karen Fawcett, head of transaction banking at Standard Chartered Bank, and ING Group board member Hans Van der Noordaa noted that their banks rely more on deposits than wholesale funding and do substantial business in fast-growing Asian markets. Because they are benefiting from a growing population with money to save and invest, the banks are doing well despite market conditions in the U.S. and parts of Europe.
Over the last year and a half, said Ryan, financial firms have learned that their ingenuity has created concerns about opaque markets. “We know the credit rating agency process has to be modified; we need more transparency as to what goes into the process,” he said. “We need to know what information developed the rating.” The industry also needs a process that gives investors confidence in what they are buying and in the valuations, he said.
Recent experiences have tempered Ryan’s enthusiasm for innovation in financial services. “A couple of years ago I had a very different view of the term,” he explained, noting that some of the financial products that have been created “have not produced the results the investor expected, while they have produced a lack of confidence in the marketplace.” Added Ryan, “We have pushed innovation in financial instruments to the extreme, and over the next few years we will focus on controlling innovation and managing the risk.”
Major innovations will now come in the area of regulation, added Ryan, who praised regulators’ response thus far. “They have no script,” he said. “Governments are arranging marriages, and so far they have done a really good job at that. We are fortunate to have people doing this boldly and calmly.”
Asked what would show the crisis is over, panelist Brian Stevenson, CEO of global transaction services at Royal Bank of Scotland, pointed to the normalization of liquidity. “There is no sign it will return anytime soon,” he said.
