What is your reaction to the Volcker rule?
Paolo Zaniboni, Head of Research, Troika Dialog Group
What we need for commercial banking is better regulation. Separating investment from commercial banking is needed but with the right level of regulation they can still operate under the same umbrella. Banks need to cut costs and we need to see rates rise. Low rates can stimulate the wrong kind of growth.

Rasik Kotecha Former FD, Philips, MD, CallCare
When your dog just keeps wetting the carpet, there’s only one thing to do, you’ve got to whack him on the nose to let him know that it’s wrong. Perhaps the regulators have to ‘whack’ the banks a little to make them respond.

Robin Johnson partner, Eversheds
Proprietary trading was the scourge of the downturn as banks started to trade on their own. Institutions are going to have to decide whether or not they give up bank status or wish to continue proprietary trading. Banks that continue will become larger hedge funds. Breaking up banks should be welcomed.

Will sovereign debt become more or less of an issue in Europe?
PZ
More of an issue. Greece is just one of the countries where you would have to question their solvency. So many countries will have to introduce high levels of austerity but do the politicians have the willingness or support to do so? Cue more uncertainty, more public unrest, more stalling which in turn is likely to result in a greater problem. The signs have not been good so far.

RK
In 2008 and 2009 we started seeing governments as the saviours that would charge in and rescue everything in sight. Are we now getting to a point where governments have used up all their ammunition and will their own resulting weakness be the new source of instability in the system?

RJ
There will be a focus on compliance and testing of sovereign states. A real federal Europe run by the largest member states is emerging. It is now implied that the stronger economies are going to have to bail out the weaker. The pressures that have been brought to bear in relation to the disparity between the economies in the EU are stark and structural reform will be required.

How do you see the BRIC economies in 2010/2011 – what are the main dangers and opportunities?
PZ
Emerging currencies will appreciate as long as there is continued growth in the regions and a benign inflationary environment. These economies have different institutions behind each market – this is healthy. Western growth on the other hand will depend on the big banks, lending, the property market and the consumer.

RK
Moving forward China will be the preferred investment destination followed closely by India and other Asian nations. However, in my view political risks – including the dangers of nationalisation and expropriation – are still obstacles to doing business in these new markets that should not be ignored.

RJ
The Brazilian, Indian and Chinese economies will go from strength to strength. Brazil is becoming a power house which might result in Argentina and Chile suffering. US-China tensions will continue to grow in relation to currency reform. Russia is a more uncertain area. The danger is that these economies could overheat, plunging the global economy into a further downward spiral.

Can ‘contingent capital’ stem the impact of future crises?
PZ
I don’t think so as I believe it goes back to my first point that you need better regulation, better risk controls and an enforcer with powers.

RK
It would certainly help to reduce the “too big to fail” mentality that led to the 2008 crisis. The Contingent Capital model would be likely to drive more rational behaviour and reduce reckless risk. The model would help preserve loans, which would reduce the domino effect of bank failure as a whole.

RJ
No comment.

Here’s Ä10,000 to buy a ten-year bond. Which nation do you go to?
PZ
I would definitely go to an emerging market nation as I believe many of these currencies will appreciate over the medium term. Although there may a limited selection of such long dated bonds I would turn to Russia and the ruble.

RK
India as it is politically a lot more stable than China.

RJ
On balance Norway though a case can be made for Brazil or Libya.

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