Securities Deregulation Impact Hot Issue for Bankers
Wooten, Terry, Modern Trader
Securities deregulation impact hot issue for bankers
International bankers grappling with the slippery issue of global deregulation of securities markets during June's International Monetary Conference in Madrid found the specter of the Oct. 19, 1987, stock market crash still floating about.
With the conference aimed at discussing changes that will take place in world markets and industry and financial services after Europe 1992, the session on global deregulation of securities markets brought some lively discussion, participants reported.
A universal concern was that exchanges haven't acted yet to remedy the problems of Oct. 19, according to Lewis T. Preston, chairman and chief executive officer of Morgan Guaranty Trust Co. of New York.
David Scholey, chairman of the S.G. Warburg Group in London, expressed concern that there isn't a lot of movement yet toward a conductor, or "an established cadre of conductors," to direct the opera of deregulation. He praised the constructive efforts of the central bank governors to coordinate rules and guidelines to ensure the stability of the international banking system.
"Such a process in the securities markets is in its stumbling infancy," Scholey says.
Lack of such a "cadre of conductors" could provide one of the threats of global deregulation by fostering "competitive deregulation between markets," he adds. "This can arise from a desire to attract business and can also be provoked in response to scandals leading to the bad law that proverbially arises from hard cases. Any such tendency will make harmonization all the harder."
Morgan Guaranty's Preston says discussion also centered on how to deal with lowering barriers between commercial and investment banking in both the United States and Japan and the effect that will have on securities markets and capital sufficiency. Preston says most agreed it is inevitable that most barriers separating commercial and investment banking will fall in both countries. The only distinction is the time, he says.
John M. Hennessy, vice chairman and chief executive officer-designate of CS First Boston Inc., tossed in some notes of caution to the bankers in his prepared remarks. After each major deregulation of a securities market over the last 15 years, Hennessy says the same pattern has occurred, whether in the United Kingdom, United States or elsewhere.
"There have been rushes to enter by new players, high-priced acquisitions of existing firms, initial large increases in new-issue and trading volumes, then the consolidation of the business into fewer and fewer dominant players who eventually make good returns on equity," Hennessy explains. "The bottom line is that deregulation has generally meant opportunity for the few and threats to the many. …