Tag Archives: bank

Bank Risk Culture: An Alternative View On The Causes Of The Last Financial Crisis

The following is the sixth in a series of articles on bank risk culture. The previous articles can be accessed here or by clicking the HOME tab on the blog.

A total meltdown in any system requires nothing less than a total rethink of the way forward.

Legislators and regulators have blamed the subprime financial crisis on a whole host of issues including derivatives, proprietary trading, deregulation, the collapse of Glass Steagall and the integration of retail and investment banking, as well as the overall failure of risk management and corporate governance. What we have learned so far in this series of articles is that the actual reasons are somewhat different as they relate to the overall culture of banking. Continue reading

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Bank Risk Culture: Why Leadership At The Top Is Single Biggest Source Of Risk

The following is the fifth in a series of articles on bank risk culture. The previous articles can be accessed here or by clicking the HOME tab on the blog.

No discussion of risk and culture is complete without examining the role of leadership in defining both. This week’s article will demonstrate that poor leadership is the single biggest source of risk to an institution. It is also a source of risk which no amount of risk management or focus on risk culture can overcome. Continue reading

Why Focusing On Bank Risk Culture Is Meaningless

The following is the third in a series of articles on bank risk culture. The previous articles can be accessed on the blog here.

In the previous articles we argued that it is futile if not impossible to separate the risk culture of an institution from the other aspects of culture within it. This article further develops this assertion by looking at some very specific examples of how banks got into trouble during the subprime crisis and why, in each case, only focusing on risk culture would have been totally inadequate.

In a January 2009, The Economist wrote an article on Citigroup entitled “A House Built on Sandy”, a less than veiled reference to the bank’s former CEO Sandy Weill and its troubles during the financial crisis. The article did not pull any punches and here are just a few of the statements it made: Continue reading

HSBC A Prime Example Of Why TBTF Means TBTM (Too Big To Manage)

In an earlier series of articles (Parts I, II and III can be found at the respective links) this blog set out the specific reasons why TBTF means TBTM. The troubles of HSBC in the US are a prime example of this maxim.

HSBC has been on a mission to be the “World’s Local Bank” and that sentiment is very proudly and profoundly expressed in its adverts—which by the way are very good. It is a pity that the same cannot be said for the bank.

In trying to achieve its global ambitions HSBC has had many missteps. In 2011, a subsidiary of HSBC was fined millions for selling products that had a minimum period of investment that was beyond the life expectancy of the pensioners they were sold to. The fact that the mis-selling went on for five whole years, from 2005 when HSBC acquired the company to 2010, speaks volumes about the bank’s ability to manage its affairs.

As distasteful as this was it pales in comparison to other HSBC missteps. In 2003 HSBC acquired the American subprime lender Household International. Phillip Inman of The Guardian wrote in an article entitled HSBC counts the cost of US housing market collapse:

Continue reading