Just as the future promises to be challenging for banks, it will be challenging for their largest shareholders as well. The foundations will have to act on three key fronts: their own governance, the recapitalization of banks and self-discipline in their relationship with banks’ managements.
As long as the increase relies more on an increase in asset prices—the “wealth effect”—and as long as this turns out to be temporary, the turnaround in prices may lead to a turnaround in private consumption as well, and therefore in activity.