15 years after Lehman Brothers: what changed in the world of finance

In the last 15 yearshe financial sector has undergone significant changes, since the fall of Lehman Brothers in 2008 until the rescue of Credit Suisse this year. These years have been characterized by a acquisition spree and greater regulation in the financial world.

Behind the 2008 crisisbanks have been forced to adopt stricter regulation due to pressure from regulators in Europe and the US. This has implied the need for maintain a minimum level capitalization to deal with significant losses and strengthen your resistance in the face of financial crises.

These regulatory measures were largely promoted by the Basel Committee in Switzerland, a key body in the banking sector. Additionally, financial institutions must now maintain substantial liquidity reserves and easily liquidated assets to respond to possible massive withdrawals of cash from customers.

The main objective of these rules, implemented since 2008is to prevent the authorities from being forced to intervene and rescue financial institutions with public funds, as happened after the collapse of Lehman Brothers.

Lehman Brothers: what changed in the world of finance

In the event of a bank failure, European leaders now have with a regulatory framework that allows them to take action independently of the size of the bank, as highlighted by Ana Botín, president of Banco Santander in 2022, when he chaired the European lobby of the financial sector.

The acquisition of Credit Suisse by UBS for 3,000 million of Swiss francs (approximately $3.36 billion) exemplifies how this new framework works. UBS announced in August that it was renouncing the financial aid from the State and the Swiss Central Bank that had been granted to it to rescue Credit Suisse.

After the crisis of Lehman Brothers, there was a wave of acquisitions in the banking sector. In 2008, Bank of America acquired Merrill Lynch for $50 billion, Halifax-Bank of Scotland (HBOS) followed suit with Lloyds for $12.2 billion, and Santander bought Bradford & Bingley in the UK, while BNP Paribas took over Fortis’ activities in Belgium. and Luxembourg.

Xavier Muscadeputy general director of Crédit Agricole and former general director of the Treasury in France in 2008, points out that the crisis served to eliminate the most fragile financial players from the market.

Despite these changesEurope experienced fewer disruptions in the financial sector compared to the United Stateswhere the crisis represented an opportunity to restructure the banking sector, according to Musca.

Currently, investment banks are dominated by US entities that took advantage of regulatory differences to expand in Europe, explains David Benamou, chief investment officer at Axiom Alternative Investments.

Bank bankruptcies in the US in early 2023, along with the rescue of Credit Suissehave raised concerns about the possibility of another global financial crisis. These events have highlighted the importance of maintaining current regulations in the sector and avoiding deregulation that could lead us back to financial problems similar to those of 2007-08.

In 2017, then-President of the United States, Donald Trump, relaxed regulations for most of the country’s bankswith the exception of the 13 largest. This deregulation contributed to financial difficulties in the first half of 2023. In response, regulators have proposed measures to strengthen the soundness of banks.

William Dudley, former vice president of the Federal Reserve’s New York office, argues that big banks are now subject to much stricter regulations compared to 2007-08. Although there is work to be done, The current situation is considerably better in terms of financial regulation.