Investment managers may have licked their lips at the expectation of European banks selling assets at knock-down prices in the face of various regulatory and business pressures since the crisis. But senior managers at Credit Suisse say the "deluge" they counted on soon will largely fail to materialise.
Australasian banks could also buy up, after surviving their own crises in the 1990s and restructuring over many years to leave them cash-rich and with fairly healthy loan books now.
Parker describes the whole deleveraging-inspired sales as “a big transfer of economic activity with European banks being the losers and EM banks and non-banking firms being the winners,”
Asset managers may also be faced by Europe’s regulators imposing tighter regulation on their risk-taking, as part of the broadly-defined ‘shadow banking’ system, he says.
A key question for the asset management community and those overseeing it is, in Parker’s view, “if you have the transfer of bank assets to the non-banking sector, should that sector then not face much tighter regulation? The issue of shadow banking is one that will wrap much tighter regulation on the asset management industry.”
One tailwind for less liquid asset sales may come from what Parker describes as “a shift going on in global asset allocation [by pensions, insurers, SWFs and endowments] moving into longer term illiquid assets” on the one hand, and ETFs/liquid assets at the other.
More distressed assets will see significant discounts in sales, the bank says, partly because of capital implications of holding them, and partly because banks are not necessarily the best placed to ‘work-out’ such assets. This means that distressed investors, and private equity funds with experience in working out complicated situations by deriving greater value from the underlying asset – such as real estate – or operating company, would be better placed.
As this whole situation plays out, says Wahid, banks are finding various ways to hold onto assets.
Some have internal departments managing deleveraging methodically “including by roll-downs, some sales and structured solutions”.