Tag Archives: Citigroup

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

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Barclays LIBOR Storm Clouds

The LIBOR problem will spread well beyond Barclays and once again banks are being asked serious questions about their values and their culture. What next for the industry?

The manipulation of the LIBOR rate by Barclays and other banks is about to set-off another major crisis within the banking industry. There appears to be no question about the bank’s guilt as Barclays have actually admitted wrongdoing and have applied to the EU for whistleblower status.

For all the negativity that will be thrown at them in the coming days and weeks, that action on the part of the management is actually quite commendable. If you disagree then I suggest you look at the number of times banks have been caught doing wrong and pay large fines but at the same time refuse to admit any wrongdoing. Continue reading

TBTF Means TBTM (Too Big To Manage) Part I

Banks that are too big to fail or TBTF are by definition also too big to manage or TBTM. What does this tell us about the state and the mindset of senior management in our major banks?

In a 2009 article entitled A House Built On Sandy (Sandy, meaning Sandy Weill, the main architect of the modern Citigroup) The Economist describes the decline of Citi in terms which are less than flattering. The following extracts tell the tale:

“TOO big to fail, too shit to buy” is the way some Citigroup insiders describe their employer… Acquisitions were poorly integrated. Cultures overlapped rather than melded)… It may be inevitable that some banks are too big to fail; but the lesson of Citi is that they can also be too big to manage.

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Author Challenges Popular Assertions of Financial Crisis

Press Release from iUniverse – Jonathan Ledwidge argues root causes of subprime mortgage crisis have not been addressed

LONDON – In his book Clearing the Bull: The Financial Crisis and Why Banks Need a Human Transformation (published by iUniverse), author and banker Jonathan Ledwidge argues that the 2008 subprime mortgage crisis was, from beginning to end, a human crisis which resulted from a poor system of values. He maintains that as long as that poor system of values remains in place, the world financial system remains at risk.

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Bank Shareholders Fight Back

The past few weeks have witnessed several instances where shareholders have rejected executive compensation packages proposed by bank boards. Is this the dawn of a new era in corporate governance?

Many years ago when I was Business Manager to the Global Head of Treasury at ABN AMRO, the unit submitted its bonus request for that year to the director responsible for the investment banking unit. When he saw the size of the request his acerbic response was; “so what about the shareholders”.

It would appear that shareholders around the world are now beginning to ask the same question. From one bank to the next shareholders are venting their displeasure at the size of executive compensation plans—forcing management to revise their payouts.

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