Media Contact
Kathy Valentine
+1 (434) 227-2177
kathy.valentine@cfainstitute.org
Investors Are Supportive of Governments Worldwide Investing in Domestic Banks, Says CFA Institute Poll
Results also show that investors believe top two reasons for market turbulence are recession fears and belief that financial institutions still do not value some assets at current market price.
New York, October 14, 2008 – CFA Institute, the global association for investment professionals, today released the results of a global member poll on governments’ attempts to stabilize the markets and liquidity.
“Our members are encouraged by the strong and varied government actions to shore up the industry and for financial firms to open their books and tell the truth about the current market value of some key assets,” said Jeff Diermeier, CFA, president and CEO of CFA Institute. “The recent G7 and global treasurer meetings are a step in the right direction. However, investors want banks and other public companies to take some responsibility for their excessive risk taking and focus on short-term goals that greatly contributed to this crisis. It is no surprise that banks are not comfortable lending to one another – no one is sure what surprises there are on a firm’s balance sheets. That needs to be addressed promptly and the actions being taken are designed to do just that.”
Anonymous comments from respondents include:
- “The severity of the crisis is so serious that now governments are the only one that can help markets and avoid financial meltdown. But is essential that over next quarters we have a process of "cleaning" of banks’ (and other investors’) balance sheets in a gradual way. It's also important legislation will improve and fix the huge bugs around world. If the next quarters will be used just to salve banks and let things go as if they were just trying surviving, it will be a mistake. A long depression could arise, or worse, another bubble somewhere else.”
- “Full transparency and disclosure by all financial institutions (including hedge funds, private equity, etc.) with an end to secret strategies as a cloak to hide positions is essential to restoring confidence.”
- “Part of what is contributing to volatility is the uncertainty of what government will or will not do. Certainty in this arena would help settle prices, and even if that is lower it would make a base for future growth. Also the increased media and press conferences concentrated in this area increase the mob-like psychology of fear and volatility in dramatic ways.”
- “Left out of the options in this survey is the absolute need to re-regulate the industry. If change to the regulatory framework is not made, then we will be operating in a framework in the future no different than the current one.”
CFA Institute Member Poll Results as of October 14,
2008
(5,148 respondents; poll was distributed on October 12, 2008)
Q1. Last week, the U.K. government announced plans to strengthen the
capital base of domestic banks by direct investing in the equity of those
banks. Is this approach a model that governments worldwide should
follow?
|
|
Number of responses |
Response percentage |
|
Yes |
3,174 |
75% |
|
No |
1,082 |
25% |
Q2. If governments were to guarantee all short-term debts of solvent
financial institutions, would this restore the confidence institutions
need to begin trading with each other again?
|
|
Number of responses |
Response percentage |
|
Yes |
3,142 |
83% |
|
No |
660 |
17% |
Q3. To what extent would the following government measures, other than
direct investment in banks and guaranteeing of bank debts, help to
unfreeze the credit markets? (1 = not at all; 5 = completely agree)
|
|
1 |
2 |
3 |
4 |
5 |
|
Central banks taking steps to eliminate insolvent institutions and to foster recapitalization of institutions deemed solvent. |
257 |
546 |
1139 |
2329 |
820 |
|
Full disclosure of bank assets, asset valuations, and valuation assumptions to the market. |
276 |
743 |
1153 |
1656 |
1266 |
|
Government doing nothing: the markets will sort this out without additional government intervention. |
2581 |
1292 |
562 |
349 |
292 |
Q4. The markets remain volatile even after the measures taken by
governments in recent weeks. To what extent have the following
contributed to the continuing volatility? (1 = not at all; 5 =
completely agree)
|
|
1 |
2 |
3 |
4 |
5 |
|
The unwillingness of commercial banks to lend to each other. |
41 |
140 |
434 |
1824 |
2670 |
|
Concern about the likelihood of a global recession. |
29 |
282 |
16% |
2498 |
1481 |
|
Concern that financial institutions continue to hold assets at values that do not accurately reflect current market value. |
69 |
415 |
804 |
2226 |
1599 |
|
Lack of coordinated actions by regulators across regions. |
364 |
1143 |
1509 |
1445 |
630 |
|
Mark-to-market accounting. |
741 |
1247 |
1289 |
1200 |
620 |
|
Slow pace of implementation of the original US$700 billion bailout package in the United States. |
610 |
1436 |
1464 |
1160 |
437 |
|
The end of the ban on short selling in the United States. |
1453 |
1539 |
1083 |
751 |
277 |
CFA Institute
CFA Institute is the global association for the investment profession. It administers the CFA and CIPM curriculum and exam programs worldwide; publishes research; conducts professional development programs; and sets voluntary, ethics-based professional and performance-reporting standards for the investment industry. CFA Institute has more than 98,000 members, who include the world’s nearly 84,500 CFA charterholders, in 134 countries and territories, as well as 136 affiliated professional societies in 57 countries and territories. More information may be found at www.cfainstitute.org.