If a week is a long time in politics, a decade is a lifetime in the financial markets. Given the scale of the backlash against the banking industry since the financial crisis, the relentless drip feed of scandal, and the barrage of new regulations – you might have expected that the industry had been transformed over the past 10 years.
But instead it’s surprising how little has changed in the banking and finance industry over the past decade, rather than how much.
In a recent report, the think tank New Financial looked at what has and hasn’t changed across more than 20 sectors of the industry by analysing hundreds of metrics in 2006 and 2016. The conclusion? With a few notable exceptions, the financial industry today looks remarkably similar to the financial industry that played a big role in causing the financial crisis 10 years ago.
Let’s start with banks. It turns out that far from being ‘too big to fail’ 10 years ago, they were perhaps ‘too big to shrink’. The global banking industry is nearly a third bigger today than on the eve of the financial crisis once you adjust for inflation. The biggest banks in the world have been particularly resistant: just two of the 100 largest banks in the world are smaller today than a decade ago, and two thirds of the banks in the top 100 in 2006 are still in the top 100 today.
Banks are much less profitable – profits at European banks have fallen by two thirds – and they are safer, with roughly twice as much capital as before. But you would be hard pressed to say they had been transformed.