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Submitted by Ramesh Kumar Nanjundaiya on

How safe is our hard earned monies in the banks as deposits and account float. There is a huge variation among banks globally and among the various countries,whereas some insure only 1% of the banks total deposits, some do not even bother to insure customers deposits at all and some banks particularly in developed countries reportedly cover upto 10%. But all these seem academic now as the the global banking industry is going through such a rough phase since the last 5 years) that there is a global rethink about how safe is a banks in doing its business and what type of market discipline do banks follow (or do not follow!). Let's analyse the scenario for the current year and beyond. US and International Banks: For starters, Libor rigging allegations continue to cost well known international banks. So what is in store for the overall banking business going forward and the impact on its sincere customers:
Year 2012/13 saw the opening up of the Pandora’s Box of banking scams (thanks to the exposure of Libor rigging fiasco [news broke in June 2012] by the well known international (sic) Barclays Bank) where many known caught up banks followed suit with the exposure for all possible type of financial rout (including FOREX manipulation) affecting the common man. All the hefty fines paid by various well known international banks (to be still paid) has left a bitter taste on their activity thereby resulting in setback for the ongoing global business and the economy. Essentially, many businesses and consumers will remain wary and uncertain in 2014 and will be reluctant to commit to major spending and investment decisions. The ongoing write down of asset values will continue and banks will have to accept credit losses thereby giving rise to small banks merging to remain sufficiently capitalized. Two types of business focus will arise from the banks:
1. Banks in the developed countries will still continue with restructuring efforts whereas, 2. Banks in developing countries will focus on growth due to the sheer size of the population (the middle class – the target sector). This class of spenders has shown that they have the necessary buying power and this is driving the economy and consumerism. How to go about this: The global banking industry needs to build “customer trust” all over again. To do this, new set of reforms are urgently needed to fundamentally reshape and rehaul the scam ridden banking industry. That there are going to be challenges in reshaping is an understatement for the banking industry, be it in the area of resolution planning, structural reforms and/or disclosure norms, etc will eventually define the approach for banks to win trust and structure their global banking activity in a sustainable and ethical way going forward.