The right lessons from the global turmoil

Written by Shekhar Gupta | Updated: Mar 3 2009, 07:38am hrs
RISK-TAKING is the signature of the financial sector.But the current economic crisis demanded a different set of fire-fighting skills. Its this abilityto have the foresight to look beyond the storm while being caught in onethat makes the winners of this years FE Best Banks awards a very special set of bankers.

There is a reason why the theme of the FE Best Bank awards this time is Lessons from the Financial Turmoil. No matter when the world emerges from the crisisand one feels the emerging economies from Asia will be the first bloc to emergeit will be necessary to read the right lessons.

The last time around, the multilateral financial architecture developed at Bretton Woods was not particularly successful in drawing up the right lessons from the Great Depression.

The subsequent scale and pace of globalisation that wiped poverty from large swathes of the globe was developed on a platform engineered by financial innovation, but which was never a part of the blueprint developed by either the IMF or the World Bank. Which is why its crucial that we get it right this time.

Its also important that the government steps in cautiously. In successful economies, governments and the private sector have played a mutually supportive role. The current spate of bailouts only serves the role of providing a sovereign guarantee to the nervous stock and credit markets. They are not an agenda for the government to run the banks or insurance companies.

Without the presence of the financial sector and the capital that they bring, emerging economies will not be able to achieve most of their millennium development goals. As the global downturn brings with it newer challenges, it is necessary that the crisis teams of governments and central bankers figure out ways to keep this essential role of the financial sector in functioning mode.

As we applaud the bankers, the credit for making their performance stand out goes to our knowledge partner Ernst &Young. Early on in the survey,we had decided that growth would be a weak way to capture performance this year. Instead, the stress had to be on parameters like liquidity and credit quality. The banks that feature here stand out for the way they struck a balance between maintaining liquidity and pushing credit.

Those banks that push credit to industry at a time like this will have developed a business relationship that will yield returns when the economy is back on track. Banks with foresight identify and develop such opportunities in difficult times. The FE Best Bank awards recognise the banks that have demonstrated this vision.

The right lessons from the global turmoil