| Sub-prime and leveraged loans |
Investment banking downturns are always quickly followed by cutbacks. Since the credit crunch started in August 2007, there have already been many redundancies and high-level departures. However, there are many more to come – apart from in the still rampant emerging market businesses. As predictions of the likely length of the financial crisis and the negative impact it will have on investment banking revenues increase, so bankers’ hopes for their own prospects correspondingly plummet. When they ponder the parlous state of the markets this summer, many bank officials, particularly in fixed income, will be seriously weighing up their options in the face of a level of job insecurity not seen since the dotcom bubble burst in 2001. In fact that is probably understating the scale of the problem. Most comparisons for the current market dislocation go back further than a decade – at the very least back to the 1994 bond bear market. However, many see more ominous parallels such as the 1929 Great Crash. Whatever comparison is most appropriate, there are tough times ahead.