Financial services: Perspectives and challenges

Financial Services: Perspectives and Challenges

Samuel L. Hayes, III Harvard Boston, 1993

Business School Press Massachusetts

Perspectives

and Challenges

is a thoughtful,

well

researched guide for financial managers and government policy makers. The main theme explored in this series of nine research studies is change. Changes in the environment surrounding both the financial service industry and financial markets in which the industry operates is explored. This exploration is of a dual nature: where industry stands and where industry needs to move. Lessons from the fall and regeneration of the Bank of America are used to launch the reader from the past staid world of banking into the dynamic environment of global financial markets. A world where the traditional bank enjoyed protection and virtually guaranteed profit margins to the highly competitive world that includes mortgage bankers, investment houses, mutual funds and other nonbank competitors. Changes in communications and information processing technology has resulted in a more efficient financial system characterized by new products and markets. These new products and markets frequently result in higher risk/higher return securities. Past errors on the part of policy makers in not understanding the changes in the financial markets are demonstrated via the savings and loan industry debacle. Changes in the financial environments of the industrial countries are critically evaluated. The strong banking and industrial ties of the Germans and Japanese are contrasted with the separation required by regulation in the United States. Changes in investment banking relationships dubbed “the client-vendor perception gap” are explored. As a

Winter

1993

guide to bankers, the power struggle between investment bankers and the corporate financial staff is discussed and analyzed. Other articles explore the changes in the reinsurance industry and changes in the competitive field of securities underwriting. Technology and client sophistication are the main contributors to the converging private placement and public offering markets. Is rule 144A really a marketing gimmick sold by investment banks to differentiate themselves from commercial banks (lacking underwriting capabilities) and to extract higher fees? This volume is very helpful for anyone who needs to understand the shift in power and influence of professionally managed pools of capital flowing into and out of countries, the rewards and havoc these flows create, and the ever changing new products and markets. This book is a must read for the financial professional and policy maker. Kathleen T McGahran Associate Professor of Accounting Columbia Business School

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