After an almost uninterrupted stock market boom since 1995, a severe stock market correction set in in March 2000 and investors faced three consecutive years of negative returns. Investor confidence was also badly shaken by unprecedented episodes of serious corporate malfeasance. Although most of the main abuses took place abroad, Europe also had its fair share.
Over time, we have observed that banks have increasingly diversified into securities trading, investment banking and asset management. Although much was expected from this diversification strategy, the market correction was a reminder that fee income generated by these businesses also carries risks. Looking back, I think we can also say that some banks entered the businesses too late and at too high a price.