By Gillian Tett and Peter Thal Larsen
Published: January 30 2009 02:00
Amid the recrimination and hand-wringing over the causes and consequences of the financial crisis, bankers and policymakers at the World Economic Forum in Davos have identified a new threat to global prosperity: the rise of financial protectionism.
The huge state-backed bank bail-outs in Europe and the US, while necessary to prevent a collapse of confidence in the financial system, have forced banks to withdraw from overseas markets in order to concentrate their limited resources at home.
A survey by Oliver Wyman showed that leaders of global banks fear that the process of deleveraging - or the reduction of debt - could continue for another three years, leading to grim economic conditions until 2011.
It also suggested that 75 per cent of CEOs in the financial sector do not expect to see any recovery in credit and equity markets until next year - and half fear it will be delayed until at least 2011, due to the scale of deleveraging now under way. The survey calculates that about 50 per cent of the market value of the financial sector has been wiped out during the last 18 months, eroding all shareholder value created since 2003.