In 2008, the US government allowed Lehman Brothers to collapse, creating a global crisis of confidence and, two years on many, commentators are questioning whether lessons have been learned and changes made for the better.
Cicero Consulting director Iain Anderson says policymakers have been slow to react in some areas. He says: “The financial services sector is very different now in regard to its expectations for growth and its place in the wider econ_ omy but, to an extent, policymakers have been going on with business as usual these last two years.”
He says policymakers were desperate to avoid any sort of protectionism in autumn 2008 as they looked to global solutions to the banking crisis but he says at the last G20 meeting the insular attitudes of old had returned.
He says: “One problem is that you are starting to see protectionism, which is something that policymakers were desperate to avoid after the Lehman crash. You have to question how long people can think in that way and not in a more international sense.”
For John Charcol senior technical manager Ray Boulger, the changes in the mortgage market have been slow going. He says: “Wholesale markets are returning very gradually, which is what is so desperately needed, and we have seen several lenders come into the market on the back of private equity in the last year. But gross lending figures have been disappointing and we would have expected them to have improved two years on.”
The banks, which teetered on the brink as Lehman fell, have been sluggish in their revivals. The Share Centre chief executive Gavin Oldman says money is still very tight for businesses and householders and deposit rates are “pathetic”.
He says: “The regulators told the banks to retain their earnings to help rebuild their capital ratios, which is a licence to walk all over people. Competition has taken a back seat as the banks brace for massive debt rollovers in 2011.”
Evolution Securities head of fixed income research Gary Jenkins says the investment world was expected to change forever as a result of the Lehman crash.
But he says: “The change has been of the slow and steady variety rather than any dramatic reshaping of the industry. The next challenge in the changing landscape is likely to be a difficult one – how do you generate decent returns in a low-yield, average-spread environment? The answer is the old one of either accepting a lower rate of return or taking more risk.”
But there are some positive changes from the Lehman failure. Bestinvest senior investment adviser Adrian Lowcock says advisers’ clients are now more discerning, ask more of the right questions and take a more active role in making sure their investments are managed properly.
He says: “Clients know there is no such thing as risk-free because it is a conversation that advisers have had more regularly with them over the last two years. But I do think a lot of that is down to the fact that IFAs have also become more savvy.”
Anderson says the repercussions of the failure of Lehman Brothers will be felt for years to come.
He says: “We are really seeing the long-term effects of Lehmans. What is being put in place now such as regulation on capital, on lending, on insurance and on derivatives will be significant game changers in the long-term.”