The credit crunch of 2007 has led to a decline in value of structured products like credit derivatives. “These products had been highly leveraged by hedge funds and investment banks, which had to pledge additional collateral,” according to TowerGroup. “Large write-offs ensued at many financial institutions, and [those] taken by brokerage firms have impacted both the U.S. and overseas markets,” reads TowerGroup’s latest report–Credit Crunch Opportunity: IT Spending Imperative in a Time of Crisis.
It pegs the total to date at $181.5 billion and climbing, causing brokerage firms to take drastic actions, including laying off staff. Technology spending is under similar pressure, though Tom Price, senior analyst, Securities and Capital Markets and author of the report, cautions against the reduction of IT spending, asserting that targeted IT spending can drive revenue in new asset classes and geographies and drive gains during periods of market volatility.