State of the Financial Services Industry: The Financial Crisis of 2015: An Avoidable History
REPORT PREVIOUSLY PUBLISHED BY OLIVER WYMAN
Oliver Wyman recently launched its 14th annual State of the Financial Services Industry report, titled The Financial Crisis of 2015: An Avoidable History in Davos, Switzerland during the 2011 Annual Meeting of the World Economic Forum. In the report, Oliver Wyman posits that although financial services executives and regulators have worked to design a more stable financial system in the wake of the global financial crisis, they should nonetheless be prepared for a variety of scenarios that could create another crisis.
The report “stress tests” the current financial system by describing a possible scenario for a financial crisis in 2015. Under this scenario, the risk forced out of the Western banking sector by tougher regulation then flows into the shadow banking sector and into emerging markets, forming bubbles in commodities and related assets. The bursting of these bubbles in turn triggers sovereign debt restructuring in vulnerable, developed markets. The report suggests this is only one of the potentially adverse scenarios financial institutions and regulators could face that should be stress tested in order for industry participants to better manage risks and shape their strategy development.
Considering a pessimistic scenario such as this is not intended as a prediction; rather we believe scenario-based planning and stress-testing are tools that should be used by financial institutions and regulators to help minimize the impact of future crises.