SAARC FINANCE,
REGIONAL SEMINAR, ISLAMABAD
Risk Management A
global historical perspective
The
great depression of the 1929 was the first triggering point
First time The Structure and Regulatory policies of the financial service industry had been put in place by the New Deal legislation.
1933 - The Glass-Steagall Banking Reform Act (also know as Banking Act of 1933) was the first
primary legislation that delineated what businesses Commercial banks could and could not enter into.
Thus Commercial Banking entered a Cozy and Secure environment
1960s saw Rising inflation, slowdown in economic growth, and rising and more volatile interest rates.
1971 we saw the failure of Bretton Woods Agreement and floating of currencies, followed by Arab Israel conflict of 1971 and OPEC price shocks of 1973-74.
Monetary control act of 1980 eliminated interest rate ceilings thus squeezing margins.
Banks were becoming global without understanding the complexities and at times the infrastructure to manage such cross border operations.
With 27 countries defaulting in 1981-82, banks focused on lending to energy and other commodities commodity prices plummeted in 1986 and the same story was repeated.
By 1985-86, Risk management was becoming an important phenomenon, but reporting were not independent with reporting lines in to business heads. Conflict of Interest!
By 1987 risk management was recognized as an important function
From the mid 1990s Risk managers were segregated
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