The financial meltdown is a result of new business models that banks have innovated, according to Mr. R Seetharaman, Group CEO, Doha Bank. The meltdown is a social crisis and not just a financial one.
As a result of financial innovations, new business models of banks emerged which changed the underlying economics of banking.
“The new financial instruments enabled credit risk to be shifted away from the originators of loans. However, securitisation also changed the nature of risks and in particular transformed credit risk into liquidity risk, then into a funding risk and ultimately into a solvency risk,” Mr. Seetharaman said in his address at the CEO Leadership Series at Washington College in Chestertown, Maryland, USA.
Speaking on the “New World Order and Opportunities -Bilateral in Terms of Trade, Investments, Banking and Finance between USA and GCC”, Mr. Seetharaman highlighted how the current global crisis impacted the global economies and human lives.
Mr. Seetharaman explained the key trends which shaped the global banking industry. “The changing trends in business and technology have resulted in a new competitive landscape in the globe. The key changing business trends includes a seamless world new cost structures and excess capacity. The changing technology trends include new distribution channels through internet, increasing rate of change in technology and Outsourced processing. The new competitive landscape provides better capacity utilisation, reduce processing costs, flexibility to meet changes and provide overall value to customers. The key reasons for these changing trends include globalisation, consumerism, technology and the new regulatory realignment,” he said.