The story of the global investment banking industry is one shaped by critical events. From the repeal in the US of the Glass-Steagall Act to the UK’s big bang deregulation, from the emergence of the tiger economies in Asia to the removal of the socialist shackles on eastern European economies, each major event has opened new markets for Wall Street’s warriors and their European competitors.
Each time, the bulge-bracket banks have captured international capital flows from newly emerging economies and have adapted to dominate domestic markets, when they have been granted entry.
Another critical event is now casting its shadow over the global investment banking industry. China and India are both opening up their domestic capital markets to foreign competitors, in different ways and at differing rates. The trend, though, is inescapable and probably irreversible. Just one of these markets would merit the term industry-critical. That both economies are reforming simultaneously probably offers bulge-bracket firms at once their greatest business opportunity and their greatest strategic challenge.
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Although both economies have been reforming for years, the domestic capital markets have moved at a different pace in the case of India and almost not at all in China.