DAVOS, Switzerland – Leading world bankers at the World Economic Forum in Davos, Switzerland, are on the defensive amid demands to regulate their industry more closely following a financial crisis that has battered large chunks of the global economy.
Bankers have been widely blamed for the financial crisis that has dramatically reduced the living standards of many in the developed world, whether they’re in work or not. A United Nations body said Tuesday that the number of unemployed around the world will rise to a record 202 million this year with many countries, particularly in Europe, struggling to post any growth at all.
“We’re doing the right thing,” Jamie Dimon, chairman and CEO of JP Morgan Chase & Co., said Wednesday.
And in defiant note, he insisted that “there will be a financial services sector” whether critics like it or not.
Dimon, who last week took a 50 per cent cut in his pay packet following a multibillion dollar trading loss in London, insisted that the world needs banks so that people can get on with their everyday lives of buying a house and growing their businesses. Without banks, Dimon said, governments couldn’t function.
Banks have spent much of the past few years in a bunker, getting on with shoring up their tarnished finances — and that’s spelled difficulties for many in need to get their hands on money they need. One solution being espoused around the world is to siphon off risky trading activities from traditional banking.
Axel Weber, a former central banker and current chairman of Swiss-based bank UBS, acknowledged the “excesses” of the past but said it was pointless to debate breaking up banks.
“Where does the financial sector start or stop?” he asked. “It’s so intricately linked that we shouldn’t throw out the baby with the bathwater …. We all provide valuable social functions.”
Both spoke in Davos at the annual gathering of more than 2,500 corporate and political leaders. The forum, like the world’s bankers, has been accused of clinging to a capitalist model that has been largely blamed for the wave of financial meltdowns over the past few years and their ensuing recessions.
At the event in the snow-coated Alpine resort, business elites gather in luxury hotels and costly parties to make deals and debate the world’s problems. Critics say they don’t solve enough of them.
Among those questioning the bankers’ assertion that the financial sector is doing fine and doing its job was Min Zhu, deputy managing director of the International Monetary Fund.
“The financial sector is too big,” he said. “The products are too complicated. Transparency is not there.”
Andrei Kostin, chairman of Russia’s VTB Bank argued it was governments who ran up excess debts — and not banks — and were largely to blame for recent economic troubles.
“We should have better regulations but not necessarily more,” he said.