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19th October 2011

Norton Rose reviews financial institutions globally

A new report by international legal practice, Norton Rose Group, covering the current activities and future prospects of financial institutions around the world, has been published.
Asia is consistently seen as the region offering most opportunity for financial institutions in the short, medium and long term. Growth economies see major opportunities in other growth economies, showing the flow of global business to be changing-respondents suggest that growth economies are no longer just investment destinations for mature economies, but are also now capable of raising their own capital, potentially bypassing the established world financial centres.
Overall, 57% of respondents feel liquidity has returned to the market, rising to 75% in Asia Pacific, however a lack of confidence among institutions and markets was highlighted by respondents as a major impediment to increasing lending. Market volatility was seen as the biggest risk by 20%. Political risk (14%) and sovereign default risk (13%) are factors that did not appear in the previous survey last year, but have rated highly this time around. Not surprisingly, cost cutting features heavily in business plans over the next 12 months.
Specifically within the Insurance sector, in comparison to the other sectors highlighted in the survey (asset management, banking and financial services), insurers are:
-taking more positive steps to address challenging economic conditions-40% are investing in new jurisdictions and 27% are planning M&A activity
-least bullish about the opportunities offered in Asia in the short term, but most bullish about them in the long term-especially in South Asia (inclding China).
-most concerned by regulatory risks
-most likely to invest in business infrastructure, with no insurance respondents reporting intentions to exit jurisdictions
-most likely to undertake M&A activity
-least likely to be raising debt or equity in the next 12 months
-least likely to be strategically disposing of non-core assets
-Most insurers agree that global regulatory standards are necessary but unachievable
-Insurers consider Conduct of Business to be the major area for regulatory enforcement
-Insurers think that most litigation will arise from insurance and mis-selling issues.