Paul E. Purcell, chairman, CEO and president of Robert W. Baird & Co., sees a lot of positive signs in the financial markets industry. U.S. banks are better capitalized than their European counterparts. Individual investors have come back to the bullish stock market. Robust energy markets are leading to the “re-industrialization” of America, he noted Tuesday during a Q&A at the SIFMA Annual Meeting.
“We have the deepest and most efficient capital markets in the world,” he said.
Yet the aftermath of the financial crisis has hurt the industry’s creditability with the public. “We have to clean up our act and get out of the newspapers,” he said. “We need to explain the good work that we do.”
Part of the solution is for financial firms to be “more client-driven, less product-driven,” Purcell said. He worries that high frequency trading has diminished confidence individual investors have in the stock market. He also suggested the industry should continue to increase capital requirements and de-risk. “Leverage is not our friend,” he said. “Canada skated through [the financial crisis] because they had very strong capital controls.”
Financial companies will have to continue to deal with rising IT and regulatory costs, Purcell said. He finds efforts in Europe to curb the compensation of bank executives troublesome. “If you regulate capital and regulate compensation, you are going to look like a utility,” he said.
Because of its sophistication, the financial markets industry moves too fast for regulators to craft effective rules, Purcell said. “Regulators are spending the vast majority of their time regulating in the rearview mirror,” he said.
In Purcell’s view, higher capital requirements and de-leveraging by financial firms would be better for the industry than creating rules based on stopping the last crisis.