World banking order to be overturned by 2020

Hedge fund predicts Europe, US and Japan to be ousted by emerging states

The world's banking landscape will be "unrecognisable" by 2020 with none of the major players coming from the US, Europe or Japan, a leading hedge fund has claimed.

Toscafund, the London-based investor founded by Martin Hughes, said banks from new growth economies (NGEs) such as China, Brazil and Russia will dominate the industry as others "retrench their activities to a mere regional presence" in the wake of the financial crisis.

"In some cases mergers and acquisitions among the old banking order will slow the evolution in the banking premier league," the chief economist Savvas Savouri said. "However, those across the new order will assert themselves through significant asset growth.

"In large parts this will be organic although assets will also be lifted by opportunistic acquisitions – banks across the 'new world' often buying what those from the 'old' are disposing as they retrench."

The hedge fund said a shift in power would not spell the end of the City of London as a major financial power, Dr Savouri argued in a discussion paper published this weekend.

London would remain a hugely popular destination for banks, but many of those located in the capital would no longer be British, European or American. Instead, the likes of Russia's Sberbank and Australia's ANZ and Westpac could be among the banks taking great swathes of office space in the Square Mile or the skyscrapers of Canary Wharf.

Dr Savouri added: "If one analogy best captures my thinking on successfully targeting London's new major office occupiers, it is a fishing one. Specifically, the place to aim isn't at the fish you are stalking, but rather just ahead of it.

"To predict who will arrive and build office footprints across London one should look not to names sliding down the ranking of the world's largest banks but to those now outside the top 20 and moving swiftly higher."

The paper also highlights Japan's decline as a major banking power. In 1990, 18 of the world's 20 biggest banks were Japanese; according to the rankings compiled by Toscafund, today there is only one, Mitsubishi UFJ Financial.