Two-thirds of banks 'back to business'

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Almost two-thirds of the world's biggest banks say they have returned to business as usual in the wake of the global financial crisis.

A survey of top executives at 62 banks around the world, including all of Canada's Big Five lenders, shows that 65 per cent of banks characterize their current "state of play" as "back to business."

Three per cent of the banks surveyed by the Institute of International Finance said they were "still struggling" while 32 per cent classified themselves as "recovering."

Ernst & Young conducted the survey, which was released on Tuesday, in late 2010 on behalf of the IIF, a Washington-based lobby group that represents about 400 financial institutions worldwide. Bank of Nova Scotia chief executive Rick Waugh serves as vice-chairman of its board of directors.

The Canadian banks taking part included Scotiabank, Royal Bank of Canada, Toronto-Dominion Bank, Bank of Montreal and Canadian Imperial Bank of Commerce. Notable banks from around the world included Citigroup, Bank of America, Barclays, Commerzbank, UBS, Credit Suisse, HSBC, ING, Royal Bank of Scotland and Bank of China.

Nearly half of the banks surveyed - 48 per cent - said the financial crisis that began in 2008 had a severe impact on their operations, while 32 per cent characterized the impact as moderate, and 20 per cent said it was low.

In general, banks in Europe and the United States were hardest hit by the credit crunch that significantly strained the capital reserves held by major financial institutions, and led to global banking reforms aimed at providing a larger buffer during future crisis.

Risk-taking by major banks, through investments, derivatives and subprime lending, led to the credit crisis. In the IIF survey, 83 per cent of the banks reported an increase in board oversight of risk, while 76 per cent said they have changed their risk appetite.

"The crisis revealed deficiencies in many firms' risk management practices," Mr. Waugh said in London where he was attending an IIF meeting. "Getting the right balance between regulation, supervision and risk management is fundamental to achieving a stable and healthy financial system."