was defined as information on the move by John
Reed, a one-time Chairman of Citicorp, the company preceding
Citigroup. This was when money laundering was taking off in
a quizzical green revolution, and it forced the
advent of an international financial regulations domain.
There were three significant developments that helped to swing
the pendulum away from local control and local regulators.
The first was the idea of free trade and free markets, the
phasing out of interest rate controls in the US and the creation
of a single European financial market.
The second phenomenon was the technological advances that
facilitated foreign participation in local markets. This was
the beginning of global finance and private institutions began
to rework strategies to expand markets.
They made it easy for individuals and institutional investors
to move into and out of certain countries to take advantage
of investment opportunities. This resulted in increased surveillance
by organisations such as rating agencies, financial analysts
and international lending agencies.
The third trend was the blurring of the lines within the financial
sector. Banks began selling insurance and annuity products,
and insurance companies started innovating to include look-alike
Although in developing countries banks fought off the insurance
companies by virtue of regulations, to prevent their entry
into the blurred-lines arena, the international forces of
liberalisation continued to relentlessly sweep the playing
fields clean of such regulatory debris.
What emerged was the concept of risk management,
the traditional forte of insurance companies. Investment companies
were now re-branding themselves in the business of risk.
According to sources, these developments caused the commercial
banking sector to lose about 40 per cent of its hold on financial
assets, the world over.
New-age products, such as options, futures and derivatives,
have centred the entire financial services industry on financial
planning advisors and the management of risk.
In addition, niche market strategies have been aggressive,
so much so that, to better serve its international customers,
Dow Jones has established a Dow Jones Islamic Market Index.
This Index tracts 600 companies whose businesses conform to
strict Islamic business Law.
There are some other observations as well, that seem to be
contrary to the textbook relationships.
It used to be that central banks played a purely technical
role. Now central banks are more involved in co-ordinating
control and aligning of the gamut of financial institutions.
In fact, they are moving away from being directed by the political
powers of the day, and striving to insulate monetary policy,
to gain greater international acceptance in the global marketplace
and facilitate free trade.
So the pace seems, more and more, to be set from abroad.
Another trend is the disconnect between the national economy
and the amount of money that seems to be in circulation.
The money appears to have a life of its own and is not necessarily
contributing to development, even if it is reflected in growth
statistics. It is almost as though the money is there, but
it does not belong to us, the local players.
It used to be that if the economy was booming, and inflation
rates were rising, returns on savings, in vehicles such as
CDs, would increase, but not so now!
Money is information on the move, and the speed of movement
equates with the speed of the Internet.