Could we be heading for a repeat of the 2008/9 financial crisis? 

The recent collapse of several banks in the USA and the government bailout is a reminder that financial crises can occur, and it is important to monitor and manage risks in the financial system. 

While it is impossible to predict with certainty the likelihood of another catastrophic collapse in liquidity, there are factors that could contribute to such a scenario. 

For example, a significant shock to the global economy or financial system, such as a major recession, could lead to widespread defaults on loans and a loss of confidence and let’s not forget Banks continue to trade highly leveraged products today just as they were in the lead up to the 2008 crash.

However it is important to note that the financial regulatory environment has undergone significant changes since the 2008/2009 crisis, and regulators have implemented measures to mitigate systemic risks in the financial system. 

While it is impossible to predict the future with certainty, the recent collapse of several banks and the potential risks associated with trading highly leveraged products highlight the importance of risk management in the financial system.

The need for additional regulation and governance to ensure the risks being taken by investment banks is a matter of debate. 

Some argue that current regulations are sufficient, while others believe that additional measures are needed to prevent a future financial crisis.

One potential approach to addressing risks in the financial system is to require investment banks to hold more capital to support their trading activities. This could reduce the likelihood of a catastrophic collapse in liquidity and provide a cushion to absorb losses.

In terms of technology implementation, increased regulation and governance would likely require investment banks to invest in additional technology infrastructure and resources to meet new requirements. 

This could involve the development and implementation of new systems and processes to manage risks and compliance, as well as the hiring of additional skilled practitioners in areas such as cybersecurity, data analytics, and regulatory compliance.

Given the IT market already faces a shortage of skilled practitioners this could make it challenging for investment banks to find and hire the talent needed to support new regulatory requirements. The cost of attracting and retaining skilled talent could also be significant, and investment banks may need to increase salaries and benefits to remain competitive, which of course will have a knock-on effect throughout the global IT market.

Outsourcing could be a potential solution for investment banks facing talent shortages in the IT market, as it could provide access to a pool of skilled programmers and technology resources at a potentially lower cost. However, outsourcing also poses certain risks and challenges that need to be carefully evaluated.

One potential challenge with outsourcing is the need to maintain effective communication and collaboration between the investment bank and the outsourced vendor. 

This could be challenging if there are language or cultural barriers, or if the outsourced vendor is in a different time zone. It could also be difficult to maintain consistent quality and adherence to regulatory requirements when working with an outsourced vendor.

Outsourcing could raise concerns around data security and privacy, as the outsourced vendor may have access to sensitive customer data or intellectual property. Investment banks would need to ensure that appropriate security measures are in place to protect this information.

In summary, while outsourcing could be a potential solution for investment banks facing talent shortages, it is important to carefully evaluate the risks and challenges associated with this approach. 

Effective communication and collaboration, data security and privacy, and maintaining institutional knowledge are all factors that need to be considered when outsourcing technology resources

Quantum maintain a base of 900 consultants right across the range of IT disciplines and have extensive experience in delivering cutting edge compliance and security solutions. 

For further information please feel free to reach out to [email protected]

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