Professor predicts "sensible and manageable" banking sector

Private wealth management and private banking practices are likely to change markedly over the years to come, as the post-credit crisis regulatory framework is put together.

This is the view of Geoffrey Wood, professor of economics at the Cass Business School, who offered his personal forecast for the banking sector today.

He said that responsible banking will be on the front foot in the new regime, with firms working to adopt ’structures that are sensible and manageable’.

The Financial Services Authority (FSA) has already indicated in its Turner Review earlier this year that a general strengthening of controls on banks will be put in place - and that systemic risk will become a key concern for regulators.

Criticism has been levelled at the watchdog’s previous system, which tended to look at banks on a case-by-case basis.

The banking sector has suffered heavy losses in the credit crunch, with firms which ran some of the riskiest business plans in the run-up to the crisis having been taken over by the government.

For example, Northern Rock, which funded its business expansion through borrowing on the wholesale markets and offered mortgages worth 125 per cent of the property’s value to customers, was forced into full nationalisation in February 2008.

Other banks, including RBS and the Lloyds group, have been subject to emergency bailouts and are now part-government owned.

Mr Wood said: ’I think you will see banks [focusing] more on structures that are sensible and manageable.

’Some firms offer very simple and very traditional building society models ... Others may choose to operate across the entire range of banking business, including some which are quite high risk, but in areas of risk which are manageable, or areas where they think these risks are likely to offset risks in other areas.’ ADNFCR-2318-ID-19200114-ADNFCR