Marry in haste and repent at leisure

Implications: 1. Good sales people do not necessarily make good bankers. 2. Part of the credit crisis can be attributed to deliver under pressure (competition and otherwise) 'excellent' customer service and settle deals fast by pushing 'discretionary' waivers.

Analysis: The malignancy that struck the financial industry worldwide since the begining of 2007 is still at its striking best.Bear Stearns is an old story. The world is its theatre now. Every country has got its own credit crisis story to tell.

Major banks the world over, except for an odd ABN AMRO and a few european banks, had largely withstood the tsunami with liberal help from their respective central banks. However, the after effects of the credit crisis are being felt now.From now to mid 2009 it will be the spectacle of the after effects. Witness the largest banking merger that is proposed between the 4th largest bank (Westpac Banking Corporation) and the 5th largest bank ( St. George Bank) in Australia. An AUD 66 billion merger which may turn out to be the largest in the history of Australian Banking . A fall in profits of St. George Bank was the trigger and a credit crisis that hit Westpac late last year created this embracing situation.  

As the situation develops and financial results of the banks see the daylight more mergers and acquisitions can be expected.

Liquidity in the world markets and the ease of borrowing at affordable interest rates will determine whether a bank can withstand on its own. And the risk of raising local interest rates which would put it out of the market is a fear that will haunt the weaker banks. It is a tricky situation. Better to merge while the going is still strong or face a Bear Stearns.

Regulators have a limited role.They can police the law and enact  stricter laws post a crisis but can't prevent a crisis. It is like, police can't prevent an accident from happening but can keep warning. But the regulators have  to be alert to pick up signals at early stages then a larger crisis can be averted. In the case of subprime crisis had the regulators not blinked when bankers were waiving norms to pick business and rapped the knuckles of the erring banks then and there this crisis would have been manageable. But hindsight is no substitute to foresight. That is what determines a great regulator.

But this crisis had to happen for the good of the financial industry. It will create an opportunity for better legislation just as the 1929 stock market crisis. This will pave the way for consolidation among the banks and good banks that turned bad but still have potential will be absorbed by stronger banks.

2010 will be the year of consolidation and a clearer picture should emerge by then and possibly see the end of the crisis, subject of course to force majeur clause.