Wealth Insights

Investors Profit from a Shrinking Banking System

The 2008 US Credit Crisis and resulting European Banking and Sovereign Crisis exposed major weaknesses in banking regulations and oversight. The reaction from policymakers and market participants set about sweeping reforms that will permanently alter the system as we know it. Ballentine Partners has followed these events closely, recognizing that massive regulatory change will create significant investment opportunities for our clients in the years ahead.

Regulatory Changes

Deregulation of the US banking industry and the introduction of the Euro in the late 90’s led to significant growth in both regions’ banking systems through the mid-2000’s. This came to an abrupt halt when declining housing prices in the US lead to massive losses across the financial system in 2007 and 2008 and the collapse of many of the nation’s oldest and largest financial institutions. The US government was forced to recapitalize the banking system with hundreds of billions of taxpayer money in order to stem the crisis. The turmoil quickly spread to Europe, whose banking system was a larger percentage of GDP than the  US’s, causing it to morph into a sovereign crisis that posed existential risks to the European Union and its common currency.

Learn more about Austin Poirier, MSFP, CFA.

 

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