CRISIS IS NOT OUR UNDOING, first appeared in the Sunday Express
January 14, 2009
Crisis is not our undoing
By Owen Kelly CHIEF EXECUTIVE, SCOTTISH FINANCIAL ENTERPRISE
I TOOK up the post of chief executive at Scottish Financial Enterprise a year ago this month. Since then the banking sector has experienced events that were unforeseen by the vast majority of experts, be they within the industry itself, regulators, politicians or academics.
With hindsight, it is possible to claim that the credit crunch is all quite simple - the whole financial system has been based on far too much debt.
But even if that were the whole story, it would still be hard to fix - or at least fix quickly. Financial services is a very diverse industry that is hardwired into all aspects of the economy. The ramifications of the credit crunch will take some years to work through the system.
So what does that mean for Scotland's financial services industry and what can we look forward to in 2009?
While banks are only part of the financial services industry, they have dominated the headlines because - as is clear in hindsight - mistakes were made in some parts of the sector.
And banks remain central to the day-today working of our economy. Not only do they deal directly with millions of us who hold accounts, they also provide the lending that allows companies to expand or people to buy assets such as houses.
People are concerned about the impact of the economic downturn on the financial industry and the wider economy, and that is completely understandable. But all UK banks are different, and they have been affected in different ways.
I would like to be clear that we are all taking action to learn the lessons of 2008.
Some of these lessons - such as the need to assess risk more accurately - can happen relatively quickly. Others - such as how best to regulate the industry without impairing the competition that serves customers well overall - will take more time. And we are only at the start of this process.
SOME of our banks are also going through major structural changes, the most obvious Scottish example being Lloyds TSB which is acquiring HBOS to form the Lloyds Banking Group.
The acquisition was unexpected for most of us, although it had been under consideration by both banks for some years. The deal was even on the cards when times were good, so it was not an idea that only popped up when the heat was on.
The most important thing now is to secure a powerful presence for the new group in Scotland, helping us to retain and develop our strong financial services industry. We will need to allow the new company to work through the changes, but the decisions to keep the historic Bank of Scotland brand and continue using the iconic HQ on the Mound in Edinburgh make for a very good start.
While the banks have been in the news, there is a lot more to our industry in Scotland. Our 300-year history in financial services is equally recognisable in areas such as insurance, investments and pensions.
Scottish companies, using Scottish skills, have proved their expertise in this field, and we can glimpse the future in companies which went through mergers a decade or so ago and are thriving now such as Scottish Widows and AEGON (which took over Scottish Equitable).
These firms retain strong Scottish bases and have world-beating reputations.
There are also many smaller businesses which provide IT, professional services and other specialist services for the financial industry in this country.
Their names may not be instantly recognisable, but they are experts in their fields, and they employ very good people.
They help to make up the critical mass of services that are essential to every international finance centre.
This, our history and the lower cost of running a business from Scotland compared to many other European centres, can give us a renewed competitive edge when we emerge from the downturn - which we will, however gloomy we may feel at the moment.
THE financial services industry has brought large numbers of jobs and investments to our country, and it is one of our major industries.
Indeed, when you are used to success, a setback is more keenly felt. But we cannot allow recent problems to shake our confidence in our ability not only to bounce back, but to ride that bounce when the time comes and take it even further.
Our task for 2009 is to keep our eyes on that prize and to make what must be a time of retrenchment and self-analysis a time of renewal as well.
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