Ted Moynihan

The financial services industry has been a “story of stability” as there hasn’t been a major financial crisis since 2008 according to a report from American consulting firm Oliver Wyman.

It released The State Of The Financial Services Industry 2022 which explores how the financial industry changed over the last decade and found the financial system has been a “shock absorber” for major global issues.

“First and foremost, there hasn’t been a major financial crisis since 2008,” the report stated. “This is a far cry from the experience of the previous 20 years, when a crisis of reasonable scale hit the financial system every four to five years.”

However, the report stated it was “by no means” calling the end of financial crises.

“The build-up of leverage in the economy after a decade of cheap money is concerning, and as most banks look at the future scenarios, stagflation — low economic growth combined with underlying inflation — is a very challenging possibility for economies and could spark credit deterioration.”

However, the report stated the evidence is the financial system is in better shape than at “any time in recent memory” to manage and continue to support economic growth.

It noted actions taken during the Covid-19 pandemic, sanctions against Russia due to the war in Ukraine, and climate change action via net zero policies as moves taken that demonstrated resilience for economic growth.

“Covid-19 turned out to create far lower credit losses than planned for,” the report stated. “The financial system played an important role of economic shock absorber, with excess capital able to absorb a high projected level of economic losses that did not come to pass, allowing financial services companies to write back up much of what they had written down.”

Oliver Wyman global head of financial services Ted Moynihan said the financial services industry had a good decade with no major crisis, while playing an important societal role in Covid-19 and on climate.

“The decade has also seen a dramatic change in the financial services landscape, to a wider industry with more firms acting in co-opetition with each other, and overall a shift in relative value from incumbents to new players,” he said in a media release on the report.

However, with rising interest rates and volatile markets, Moynihan anticipates different conditions in the next few years “with the benefits going to those firms that can anticipate and pivot to the new sources of value growth”.