Financial services specialist says global lending institutions on path to recovery 

J. Christopher Flowers

J. Christopher Flowers

FINANCIAL INSTITUTIONS are on the path to recovery from the global economic crisis, according to J. Christopher Flowers, an international specialist in financial services.

Speaking at the London Business School (LBS) thought leadership forum in Dubai, Flowers shared his thoughts and insights on the global outlook for the financial services industry during an evening hosted by the Coller Institute of Private Equity and the LBS.

“One thing I think, which is not necessarily a common opinion, is that eventually, returns on capital and profitability for financial institutions will get back to normal,” said Flowers.

“There are those in the financial institutions industry who think we are facing permanently low returns on capital. I don’t see it that way, the reason being that these industries are absolutely essential to the functioning of the economy. It is necessary that more capital flows into these industries so they can provide the funding the economy needs, and that will require higher ROEs,” he added.

Flowers also discussed the crucial lessons that banks, insurance companies, key stakeholders and regulators have learned from the financial crisis. The discussion focussed particularly on Europe and the concerns posed by uncertainty of the Euro.

“We have seen the volatility of the markets, but to have a situation where there are immense doubts whether a currency will persist or not… is a very unusual issue. If a country abandons the Euro, most banks in that particular country and some in others will go broke. And that will be disastrous,” he warned, adding “We think it’s highly likely the Euro will hold together.”

The London-based Flowers, who was formerly a partner in charge of the Financial Institutions Group at Goldman Sachs, said the fundamental economic and political challenges will be matched by profound changes in financial services, and its regulation in particular.