R. Seetharaman-Doha bank, CEO
The financial meltdown is a result of new business models that banks have innovated, according to Mr. R Seetharaman, Group CEO, Doha Bank. The meltdown is a social crisis and not just a financial one. As a result of financial innovations, new business models of banks emerged which changed the underlying economics of banking. The new financial instruments enabled credit risk to be shifted away from the originators of loans. However, securitisation also changed the nature of risks and in particular transformed credit risk into liquidity risk, then into a funding risk and ultimately into a solvency risk," Mr. Seetharaman said in his address at the CEO Leadership Series at Washington College in Chestertown, Maryland, USA.
Speaking on the “New World Order and Opportunities -Bilateral in Terms of Trade, Investments, Banking and Finance between USA and GCC”, Mr. Seetharaman highlighted how the current global crisis impacted the global economies and human lives.
Talking about the role of United States in finding a solution to the financial crisis, he said: “Recent data shows the US unemployment at 8.3 per cent and coupled with recent trends in manufacturing and consumer confidence the recovery chances have improved. However the risks highlighted by the US Federal Reserve should also be considered. The US trade is expected to rise to $4.4 trillion, up 62.3 per cent, in the next 15 years as long-term commodity demand continues. World trade volumes are set to grow by 73 per cent by 2025. China is expected to remain the US's most important trading partner until at least 2025. The US is the most open and liberal economy in the world and foreign trade and direct investment is a net positive for both GCC and the United States”
Mr. Seetharaman explained the key trends which shaped the global banking industry. “The changing trends in business and technology have resulted in a new competitive landscape in the globe. The key changing business trends includes a seamless world new cost structures and excess capacity. The changing technology trends include new distribution channels through internet, increasing rate of change in technology and Outsourced processing. The new competitive landscape provides better capacity utilisation, reduce processing costs, flexibility to meet changes and provide overall value to customers. The key reasons for these changing trends include globalisation, consumerism, technology and the new regulatory realignment,” he said.
Mr. Seetharaman highlighted the bilateral trade trends between US and GCC. He said: “There are many areas where mutual strengths can be leveraged to increase co-operation such as trade, finance and investment. The total trade between GCC and the US has increased from $71.1 billion from 2010 to $89 billion for the 11 months ending November 2011. The increase in bilateral trade was mainly due to increase in exports from all GCC countries which had picked up in 2011 over 2010 due to higher oil price. The US is exploring the development of a Trade and Investment Cooperation Agreement with the GCC nations as a whole.”
He said: “The US investment in Qatar is expected to exceed $8B and is mainly in oil and gas sector. In June 2011, Qatar airways and Boeing announced order for 6 Boeing 777 Airplanes amounting to $1.7 billion. In April 2011, the US and the State of Qatar signed a Memorandum of Understanding (MoU) regarding cooperation to enhance global food security. Qatar Science and Technology Park (QSTP) opened in March 2011 in which chevron invested up to $20m for solar test facility. U.S. Department of Energy (DOE) and Qatar Science and Technology Park (QSTP) signed a MoU in April 2011 to explore energy efficiency, carbon capture and solar technology. US companies evoke interest in Saudi property sector.”
Mr. Seetharaman gave his insights on the current trends in financial markets. He said “The year 2012 saw the global capital markets rising on account of optimism mainly from the United States, Germany and China. The markets are still watching the Greece crisis for which a solution is yet to be arrived. The recent move by Federal Reserve to keep rates up till 2014 has given a boost to commodities namely gold, silver and other commodity related sectors. The US and emerging economies capital markets can provide excellent opportunities for long term investors. The dollar which was rising till end of 2011 dropped after the US federal move. Currency markets will continue to fluctuate due to the crisis in advanced economies. The GCC region’s bond yields are going up due to euro crisis and many players in GCC are planning to raise funds for refinancing which provides excellent opportunities for global bond investors. There is also potential in Asian bond market and the US property market”
In his concluding remarks, Mr. Seetharaman said: “This crisis is a social crisis and generating positive reflection of enhancing human dignity and drive towards moral and ethical global governance.”