Report: Banks could face perpetual bankruptcy

31 December 2012

Major banks need to implement sweeping changes to their business models if they are to avoid a situation where they are under constant financial pressure.

That is according to a new report produced by leading industry consultant Alix Partners, which has warned lenders of the perils of continuing with their pre-recession practices in the aftermath of the global economic downturn, the Daily Telegraph reports.

The study indicated that large banks are putting themselves in danger of falling into a "perpetual" cycle of bankruptcy unless they take action to address their toxic growth strategies and bonus cultures sooner rather than later.

For instance, Alix indicated that investment banks are currently overpaying their staff members by around $18 billion annually, despite the deep financial trouble many of these organizations are in.

With this in mind, the body noted that lenders are on the way to emulating the fate of the carmaking and aviation industries, which have transformed from "solid businesses" to "perpetual wards of the bankruptcy court" over the last 20 years.

By Claire Archer

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